TransUnion Must Pay $60M For Mistakenly Tagging People As Possible Terrorists

A federal jury in California has ordered credit reporting agency TransUnion to pay $60 million to individuals it wrongly tagged as terrorists or drug traffickers.

Under the Fair Credit Reporting Act (FCRA), credit reporting agencies (CRAs), like TransUnion, Equifax, and Experian are required to provide accurate information about consumers to lenders and allow individuals to review this information and dispute it if incorrect.

But the 2012 class-action lawsuit [PDF] claimed that TransUnion wasn’t doing that when it identified individuals as drug kingpins or terrorists because their names were similar to those found on a list maintained by the Treasury Department’s Office of Assets Control (OFAC).

TransUnion had argued in a previous lawsuit, Cortez v. TransUnion, that it was not required to disclose to consumers that their name had been linked to the OFAC list, and that TransUnion did not have to investigate a person’s claim that they had erroneously been associated with that list.

The Third Circuit Court of Appeals rejected [PDF] TransUnion’s argument in 2010 and said the company was liable for failing to disclose OFAC alerts in files and for failing to reinvestigate and correct an OFAC alert erroneously attributed by TransUnion on the wrong file.

Despite this, TransUnion allegedly continued to compile and sell reports that included erroneous OFAC alerts, while failing to provide those same alerts in the files provided to consumers who requested their information.

Additionally, the lawsuit accused TransUnion of misinforming individuals of their right to dispute inaccurate OFAC alert information and have it corrected as directed under the FCRA.

The lead plaintiff in the case said that in Feb. 2011 he applied for a vehicle loan and the dealership ordered a TransUnion credit report.

The resulting report had him flagged as a possible drug kingpin, leading the car dealership to refuse to extend the line of credit as businesses in the U.S. are generally prohibited from dealing with anyone on the OFAC’s list.

The dealership showed the man a copy of the report, which included the names of two unknown and unrelated individuals, both of whom appear on the OFAC list of specially designed nationals and blocked persons.

“Contrary to the information contained in the TransUnion report prepared for and sold to [dealership], Plaintiff is not an individual included on the OFAC list, and is not related to either [of those individuals],” the suit states.

The Plaintiff said the interaction left him “shocked and embarrassed,” and he promptly called TransUnion to dispute the erroneous reporting of his inclusion on the OFAC list.

A rep for TransUnion claimed that there was no OFAC alert on his report and that there was no way for him to make a dispute. The man then asked for a copy of his report to confirm the alert was not included, at which point the rep said the OFAC alert would not be included in the file sent to him.

Days later, the plaintiff said he received a letter from TransUnion notifying him of the two associated names on his credit report. This, the suit claims, was not adequate disclosure as defined by FCRA and contained no summary of rights as required by the Act.

The lawsuit claims that because TransUnion did not provide the OFAC alert in the man’s report, the CRA misled consumers concerning information that was being reported about them to third parties and deprived the individuals of the opportunity to dispute and correct the inaccurate information.

On Tuesday, a California federal jury found [PDF] that TransUnion willfully failed to follow reasonable procedures to ensure accurate information related to OFAC information, failed to disclose OFAC information to individuals, failed to provide individuals with a summary of their rights under FCRA. In the end, the jury determined [PDF] that each member of the class should receive $7,337.30 in punitive and statutory damages.

A rep for TransUnion tells Consumerist that the company is evaluating its options related to the verdict.

“We maintain that we did all that was feasible at the time period in question to achieve the maximum accuracy for our consumers while meeting the needs of commerce for consumer credit, which is the goal of the FCRA,” the rep said.