April 16, 2001
The United States Court of Appeals for the District of Columbia Circuit has upheld a Federal Trade Commission decision ordering the Trans Union Corporation to stop selling consumer reports in the form of target marketing lists to marketers who lack an authorized purpose for receiving them under the Fair Credit Reporting Act (“FCRA”). This ruling prohibits Trans Union from selling to target marketers the names and addresses of individuals who meet specific credit criteria — such as a list of people who possess an auto loan or a credit card with a credit limit greater than $10,000, or those that have two or more mortgages.
In February 2000, the Commission unanimously upheld an administrative judge’s opinion that Trans Union’s target marketing lists are “consumer reports” as defined by the FCRA and that by selling the information to target marketers who lack one of the “permissible purposes” enumerated under the Act, Trans Union is violating the law. Trans Union petitioned the Court of Appeals to review the FTC order. The case was argued before the court on February 6, 2001 and the court’s opinion was issued on April 13.
The Court’s Opinion, filed by Judge David S. Tatel on behalf of himself, Chief Judge Harry T. Edwards and Judge Douglas H. Ginsberg stated: “Petitioner, a consumer reporting agency, sells lists of names and addresses to target marketers – companies and organizations that contact consumers with offers of products and services. The Federal Trade Commission determined that these lists were ‘consumer reports’ under the Fair Credit Reporting Act and thus could no longer be sold for target marketing purposes. Challenging this determination, petitioner argues that the Commission’s decision is unsupported by substantial evidence and that the Act itself is unconstitutional. Because we find both arguments without merit, we deny the petition for review.”
As part of its argument in the case, Trans Union contended that neither the FCRA nor the FTC Order demonstrated a substantial government interest in protecting consumers’ privacy and, therefore, violated Trans Union’s right to free speech under the First Amendment. “Contrary to the company’s assertions, we have no doubt that this interest – protecting the privacy of consumer credit information- is substantial,” the Court wrote.
This case began in 1992, when the Commission filed an administrative complaint alleging that Trans Union violated Sections 604 and 607(a) of the FCRA by “compil[ing], for sale to clients, lists of consumers, based in whole or in part on information contained in its consumer reporting database . . . .” Administrative Law Judge Lewis F. Parker upheld the allegations in a 1993 summary decision that the Commission affirmed in 1994. The United States Court of Appeals for the District of Columbia Circuit thereafter remanded the case to the Commission for further findings and, after a full trial, Administrative Law Judge James P. Timony issued an Initial Decision and Order on July 31, 1998. Judge Timony held that counsel for the FTC presented evidence showing that Trans Union’s lists are “consumer reports” under the FCRA and that Trans Union disclosed them to entities which lacked a statutorily-defined permissible purpose for obtaining them. Such disclosure violated Sections 604 and 607(a) of the FCRA. Trans Union appealed both rulings to the Commission, which upheld them.
Trans Union is based in Chicago, Illinois, and is one of the three national credit bureaus, or consumer reporting agencies, in the United States. Its database currently contains information on approximately 190 million consumers.
Trans Union must halt the illegal sales within ten days of the Court’s ruling, or April 23, 2001.