The Legal Brief

Good News for Users of Credit Reports: West Virginia Federal Court Adopts the “Reason to Believe” Standard For Users of Credit Reports Under 15 U.S.C. § 1681b

January 31, 2024

By: Jon L. Anderson

On January 26, 2024, the United States District Court for the Northern District of West Virginia issued an Order dismissing claims made against Jackson Kelly’s clients under the Fair Credit Reporting Act (“FCRA”) in Wyatt v. A&B Sales, Inc., et al., Case No. 5:23-cv-303.  In doing so, the court adopted the “reason to believe” standard with respect to the accessing of consumer credit reports under § 1681b of FCRA.  This is the first instance of a federal court in West Virginia addressing and adopting the “reason to believe” standard.

The plaintiff alleged that he has previously co-signed on a motor vehicle purchase for his sister-in-law.  When his sister-in-law went back to that same dealer to buy another vehicle years later, the plaintiff was not present and did not intend to be a party to the transaction.  The plaintiff alleged, however, that the dealer impermissibly used his information from the prior transaction and identified him as a co-signer on the loan application.  When the dealer submitted the loan application to various creditors, the plaintiff’s credit report was accessed accordingly.

15 U.S.C. § 1681b provides that a consumer’s credit report can only be furnished and accessed for permissible purposes.  The plaintiff alleged the lenders violated the FCRA by accessing the plaintiff’s credit report without a permissible purpose because he did not intend to be a party to the transaction and his report was, therefore, accessed impermissibly without his consent.  The case was essentially one alleging identity theft where a potential creditor pulls a credit report in response to a fraudulent credit application that uses the victim’s actual and correct information.

District courts throughout the Fourth Circuit have held that the standard for users accessing a consumer’s credit report under 15 U.S.C. § 1681b is that of a “reason to believe.”  The user can access the credit report as long as it has reason to believe it is being accessed for a permissible purpose.  The typical example would be that in a case of identity theft where the individual’s true, personal information is being used in credit applications and the creditor, therefore, has reason to believe the application is a proper one and report accessed for a permissible purpose.   

The plaintiff opposed the application of the “reason to believe” standard.  The court agreed with the defendants.  Following the lead of other district courts in the Fourth Circuit and elsewhere, the court held the “reason to believe” standard to be applicable and dismissed the claims as there were no allegations that the defendants had no reason to believe they were not accessing the plaintiff’s credit report for an impermissible purpose. 

The” reason to believe” standard Is an important one for creditors.  Significant aspects of modern-day commerce often require that near instantaneous credit decisions.  When an individual’s correct information is submitted for a potential transaction, creditors should have the right to reasonably rely upon that submission as being permissible.  Otherwise, in cases such as identity theft or similar unauthorized use of a consumer’s information, which the creditor has no reason to be aware of, liability under Section 1681b(a) inches closer to strict liability