Unfair credit report? Fair game for defamation!

Here's a decision that is timely enough to warm some hearts: Roybal v. Equifax, 2008 U.S. Dist. LEXIS 79789 (E.D. Cal. 2008)

In this case, the Plaintiffs were husband and wife Daniel and Vida Roybal. They sought to refinance their mortgage, only to learn that "approximately 100 inaccurate, derogatory entries were being reported on Mr. Roybal's credit report by Rickenbacker Industries ("Rickenbacker"), a collection agency." The couple went through a variety of steps, documented in the opinion of the court, to have these false entries removed from their credit history - but the inaccuracies kept showing up, until the couple finally had to hire a lawyer to get their credit history cleared.

Mr. and Mrs. Roybal didn't take things lying down. They sued, for a number of counts including (well, look what blog you're reading, after all) defamation. Now, in complete candor, the motion that this decision addresses is just a motion for summary judgment. That is, the defendants asked the court to throw the case out before it even got to a jury, claiming that even if everything the plaintiffs are saying is true, those facts do not support the claims for relief. The court will deny a motion for summary judgment if there is a "genuine issue of material fact" - that is, if the facts might indeed support the claims, and there is some dispute about what the facts are.

The Roybal's main claim was not defamation, but defendants' alleged violation of the "Fair Credit Reporting Act," a federal statute which requires the folks who provide credit histories to do so accurately, and to double-check if inaccuracies are brought to their attention. The Roybal's other claims were state law causes of action, including a number of negligence-based theories, as well as defamation, invasion of privacy, and false light.

The defendants argued pre-emption - that the plaintiffs could not bring those state law causes of action because the federal law prohibited negligence and defamation actions over incorrect information provided to the consumer - but the court disagreed, because here the incorrect information was provided to the bank that the consumers were trying to get a loan from.
The court also found that no privilege was invoked simply because the Roybals, in seeking a loan, had authorized the bank to get the credit report. In order to escape this privilege, the Roybals had to show malice, and this they could do:

Defendants do not dispute that inaccuracies appeared on Mr. Roybal's credit report during 2004, nor do they dispute that copies of Mr. Roybal's credit report were provided to lenders in 2004. Defendants instead argue that they are entitled to protection... because Plaintiffs have not shown that Defendants acted with "malice."

However, since Plaintiffs claim to have provided notice of the inaccuracies in Mr. Roybal's credit file to Defendants on multiple occasions beginning in 2004, Plaintiffs have sufficiently shown, for purposes of the current Motions, that Defendants had knowledge of the falsity of the information contained in Mr. Roybal's credit report.

The Court gives little specific discussion to the defamation claim, because little is needed: "Defendants argue that Plaintiffs' Defamation cause of action must fail because Plaintiffs cannot produce any evidence of "malice"... The Court addressed this argument in detail above." End of discussion. The false light claim is similarly treated, along with the comment that there's no reason plaintiff's can not bring both a defamation and a false light claim.

As a practical matter, the Court denying summary judgment means that these questions will go before a jury, and under the current economic situation a jury is not likely to be kindly disposed to a credit agency that reports false information, thus harming a couple's ability to get credit. In these trying times, things are bad enough without having negative falsehoods piled into credit reports, and it is good to know that a Court is letting folks who have suffered such an indignation have a shot at convincing a jury that a remedy is due.

However, as I said, a jury is not likely to be too friendly to the credit agency, and there's no point in these defendants - wealthy companies though they may be - to pay a lot of attorney's fees on the way to losing a big verdict. I would expect to see a settlement in this case favorable to Mr. and Mrs. Roybal, before a juror is ever seated.