Credit Report Agencies Liable if They Pass On Bad Watch List Data

Shan­non P. Duffy, The Legal Intel­li­gencer, On Fri­day August 20, 2010, 3:16 am EDT

In a sig­nif­i­cant set­back for credit report­ing agen­cies, the 3rd U.S. Cir­cuit Court of Appeals has ruled that con­sumers have the right to sue if a credit report includes inac­cu­rate infor­ma­tion drawn from a gov­ern­ment watch list.

The rul­ing in Cortez v. Trans Union comes in the case of a woman who claimed she was falsely branded as a Colom­bian drug dealer when she was con­fused with some­one on the U.S. Trea­sury Department’s watch list of known nar­cotics traf­fick­ers and terrorists.

The 91-page opin­ion marks the first time that a fed­eral appel­late court has held that such infor­ma­tion is reg­u­lated by the fed­eral Fair Credit Report­ing Act, and could force Trans Union and other credit report­ing agen­cies to over­haul their poli­cies for han­dling such infor­ma­tion in order to guar­an­tee its accuracy.

But the rul­ing also includes a set­back for plain­tiffs because the appel­late court refused to con­sider whether the trial judge was too harsh in slash­ing a puni­tive award of $750,000 down to $100,000 on the grounds that the plain­tiff had opted to “accept” the trial judge’s remit­ti­tur rather than opt for a new trial.