In Heaton v. Social Finance,  2015 WL 6003119, at *3 (N.D.Cal., 2015), Judge Henderson found that defendant’s online credit application might be mere comparison shopping such that there was no permissible purpose under FCRA to pull the consumer’s credit report.

Plaintiffs Shawn Heaton (“Heaton”) and Anna Ahlborn (“Ahlborn”) each visited Defendants’ website and had slightly different experiences. Both Plaintiffs registered for the website by visiting the registration page. Joint Statement of Undisputed Material Facts (“UMF”) at 3-4 (Docket No. 75). The phrase “this inquiry will not affect your credit score” appeared on the registration page. Plaintiffs’ Opposition to MSJ (“Opp’n”) at 4 (Docket No. 80). After registration, Plaintiffs were confronted with the website’s “consents” page, and given an option to click a hyperlink to expand and view the “credit disclosure.” UMF at 29-30; Pls. Ex. 3 at 2 (Docket No. 81-3). The credit disclosure, once expanded, contained the following language: ““You are authorizing us today for purposes of this loan application, and in addition, so that we can determine your eligibility for a separate personal loan, and from time to time if and when we approve you for a loan, to carry out the following: -Investigate your credit worthiness, and to obtain credit information, including a consumer credit report, and other information about you from others, such as credit reporting agencies…” Ou Decl. Ex. G at 2 (Docket No. 77-7). When Heaton checked the box agreeing to the credit disclosure – which had a heading titled “Soft Credit Pull Authorization and Final Submit” – and clicked a button labeled “Submit,” a soft inquiry1 was performed on his credit in order to prequalify him for certain loan products. MSJ at 4. Ahlborn clicked a button labeled “Start Application” after having clicked “Continue” to navigate away from the consents page. Id. at 5. After she entered her total student loan amount and clicked “Start,” a soft inquiry was performed on her credit. Id.  After leaving the “consents” page, Heaton started an application for a “Student Loan Refi.” Opp’n at 5. He decided not to select any of the products for which he was prequalified, he navigated back to the home page and began the same process for a personal loan. Id. The next choice Heaton encountered was to “Select an Amount” – text which appeared next to a display box in which the website had pre-filled the amount of $10,000 and displayed partial terms for different loan options. Ou Decl. Ex. L (Docket No. 77-12). Heaton clicked “Request Amount,” and a hard inquiry was performed on his credit. MSJ at 6-7.  After entering her total loan amount and having a soft inquiry performed on her credit, Ahlborn was also shown a screen with partial loan terms for different loan products. Opp’n at 6; Ou Decl. Ex. V (Docket No. 77-22). At the top of the screen was the statement: “Choose your product now, or you can choose your product later.” Id. As in Heaton’s case, the website had pre-selected one of the products for Ahlborn, and after she clicked a button either stating “Choose Now” or “Choose Later,” a hard inquiry was performed on her credit. Opp’n at 7.  Plaintiff Heaton’s credit score was 756 on July 5, 2014. Pls. Ex. 19 (Docket No. 81-19). Defendants performed the hard inquiry on his credit on July 9, 2014. On August 18, 2014, Heaton applied for a credit card with Credit One Bank, and was denied. Second Amended Complaint (“SAC”) ¶ 79 (Docket No. 65). One of the reasons for the denial was that there were too many inquiries on his credit. Id. Plaintiff Ahlborn alleges that her credit score also decreased due to the hard inquiry performed by Defendants. Id. ¶ 107.  Plaintiffs filed suit on November 24, 2014, claiming that Defendants mislead consumers by assuring them that any inquiries performed by Defendants would be soft credit pulls and not affect their credit, all while intending to perform hard pulls. Plaintiffs contend that Defendants knew that the language on their website caused this confusion for consumers – evidenced by numerous complaints on their social media accounts, through the Better Business Bureau and directly to their customer service department – but chose not to correct it for the sake of improving their numbers. Pls. Exs. 5-7, 12, 16.

Judge Henderson found a triable issue of fact as to whether there was a permissible purpose under FCRA to pull the credit report under these circumstances.

Defendants first claim that they are not in violation of the FCRA because they had a permissible purpose for conducting the hard inquiries: namely, the “credit transaction” purpose. Defendants argue that both Plaintiffs initiated credit transactions by requesting loan amounts and loan products. However, the cases Defendants cite in support of this argument involve facts that evidence the plaintiffs’ intent to have their credit pulled, either because the plaintiff specifically requested financing or completed a loan application. See Stergiopoulos v. First Midwest Bancorp, Inc., 427 F.3d 1043, 1047 (7th Cir. 2005) (plaintiffs requested financing at a car dealership; issue was whether the credit transaction applied to the particular defendant lender); Huertas v. Citigroup, Inc., No. 13-2050-RMB/JS, 2015 WL 2226012 at *1 (D.N.J. Aug. 21, 2014) (“[i]t is undisputed that Plaintiff applied for both credit cards”); Baker v. Trans Union LLC, No. 07-8032-PCT-JAT, 2008 WL 4838714 at * (D. Ariz. Nov. 19, 2009) (“[plaintiff] does not dispute that she applied for a mortgage”).  Here, the facts are far from undisputed as to whether Plaintiffs’ actions on Defendants’ website constituted a credit transaction, or whether such action simply constituted “comparison shopping” behavior, which the Federal Trade Commission (“FTC”) has stated is not enough to rise to the level of a credit transaction under the FCRA. See Letter from David Medine to Karen Coffey (Feb. 11, 1998), 1998 WL 34323748 at *1 (FTC Staff Op. Ltr.) (credit transaction initiated by consumer only when the consumer “clearly understands that he or she is initiating the purchase”). Therefore, genuine issues of material fact exist as to whether a permissible purpose for conducting hard inquiries on Plaintiffs’ credit existed.

Judge Henderson took an expansive view of the UCL, finding that the claim of reduced credit score provided standing under the UCL.

California’s Unfair Competition Law prohibits “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. Defendants argue that summary judgment is warranted on Plaintiffs’ UCL claims because (1) Plaintiffs do not have standing; (2) Defendants did not make “unfair” or “fraudulent” statements; and (3) Defendants did not engage in “unlawful” conduct.
Defendants contend that Plaintiffs failed to establish private plaintiff standing. Standing under California’s UCL is “substantially narrower” than Article III standing, as the plaintiff must demonstrate a loss of money or property. Kwikset Corp. v. Super. Ct., 246 P.3d 877, 885-86 (Cal. 2011). Defendants contend that Plaintiffs’ allegations of lower credit scores did not result in any monetary impact, and that because a drop in credit score alone does not establish standing, summary judgment is warranted. It is true that hypothetical and non-particularized injury is insufficient for UCL standing, and that in some cases, a drop in credit score is too hypothetical. See Birdsong v. Apple, Inc., 590 F.3d 955, 960-61 (9th Cir. 2009). However, the majority of courts(4) in this Circuit have found that in some cases a decreased credit score can be sufficient for UCL standing, and the Ninth Circuit has cited this with approval. Rubio v. Capital One Bank, 613 F.3d 1195, 1204 (9th Cir. 2010). [FN 4:E.g. White v. Trans Union, LLC, 462 F. Supp. 2d 1079, 1084 (C.D. Cal. 2006); Venugopal v. Digital Fed. Credit Union, No. 12-6067-ED, 2013 WL 1283436, at *5 (N.D. Cal. Mar. 27, 2013); Aho v. AmeriCredit Fin. Servs., Inc., No. 10-CV-1373, 2011 WL 2292810, at *2 (S.D. Cal. June 9, 2011).]  Furthermore, Heaton’s credit card application with Credit One Bank was denied due to too many inquiries, which was a direct result of the hard pull on his credit. Thus, Plaintiffs have demonstrated sufficient injury under California’s UCL. Defendants also contend that Defendants made no “unfair or fraudulent” representations, and did not violated the FCRA or CCRAA to satisfy the unfair competition law’s “unlawful” prong. However, these are issues of fact that are clearly in dispute. Plaintiffs offer evidence that the credit disclosure was titled in a misleading way and that a reasonable consumer would believe that Defendants would not make any hard inquiries. Furthermore, Plaintiffs offer evidence that Defendants knew the practice was misleading and purposefully failed to correct the website. Viewing the evidence in the light most favorable to the non-moving party, triable issues remain as to Plaintiffs’ UCL claims. Thus, summary judgment is inappropriate.