Unreported / Non-Citable
Background
Bernard Patterson, Joshua Adams, and Linda Jordan filed a class action against Wells Fargo in the Northern District of California, alleging that Wells Fargo opened bank accounts in their names without their authorization and then pulled their credit reports without a permissible purpose—violating both the federal Fair Credit Reporting Act (FCRA) and California’s Consumer Credit Reporting Agencies Act (CCRAA).
The plaintiffs alleged that before opening the unauthorized accounts, Wells Fargo received their correct personal identification information from an identity verification service. For plaintiffs Patterson and Adams, this correct PII contradicted the information Wells Fargo had associated with the unauthorized accounts—a red flag that the accounts were not legitimately opened. Despite these discrepancies, Wells Fargo pulled the plaintiffs’ credit reports after opening the accounts. The district court granted Wells Fargo’s motion to dismiss all claims under Rule 12(b)(6).
The Court’s Holding
The Ninth Circuit affirmed in part, reversed in part, and remanded. In a memorandum disposition by Judges S.R. Thomas and Christen (with a partial dissent from Judge Forrest), the court held that the plaintiffs adequately alleged both that Wells Fargo obtained their credit reports without a permissible purpose and that the violation was willful.
On permissible purpose, the court found that the plaintiffs’ allegations—that they had no relationship with Wells Fargo, did not apply for accounts, and that Wells Fargo opened accounts in their names and then pulled their credit reports—were sufficient to “rule out many of the potential authorized purposes” for a credit pull. The court noted that the statutory provisions Wells Fargo relied on both require that the consumer initiate the transaction, which the complaint did not suggest happened.
On willfulness, the court found the complaint supported an inference of knowing disregard of FCRA obligations, particularly for Patterson and Adams, where Wells Fargo had conflicting PII yet proceeded to pull credit reports. However, the court affirmed dismissal of the negligence claims, finding the allegations of actual damages too conclusory. Standing for an FCRA violation does not automatically satisfy the separate requirement of pleading actual damages under the negligence provision.
Key Takeaways
- Under FCRA section 1681b(f), a plaintiff must allege facts supporting an inference that a defendant obtained their credit report without a permissible purpose. The defendant bears the burden of showing an authorized purpose.
- The “legitimate business need” exceptions under FCRA require that the consumer initiate the transaction. A bank’s unilateral belief that someone is a customer is not sufficient.
- When a bank receives correct PII from a verification service that contradicts the information associated with an account, proceeding to pull a credit report can support an inference of willful FCRA violation.
- Establishing Article III standing based on an FCRA violation does not automatically satisfy the requirement to plead actual damages for a negligence claim under section 1681o.
- California’s CCRAA tracks FCRA on these issues, so the analysis applies equally to state-law claims.
Why It Matters
This decision continues the Ninth Circuit’s close scrutiny of unauthorized account practices at major financial institutions. For banks operating in California, the case is a reminder that FCRA and CCRAA exposure persists even at the pleading stage when there are factual allegations suggesting the bank knew or should have known it lacked a permissible purpose to pull a consumer’s credit report.
For consumer protection attorneys, the case clarifies that the bar for pleading willful FCRA violations is achievable when the complaint includes specific factual allegations about PII discrepancies and the absence of any consumer-initiated transaction. However, the negligence holding is a cautionary note: conclusory allegations of distress and reputational harm will not survive a motion to dismiss without supporting factual detail.