Court Opinion

ID: 185385
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:22+00
Date Added: 2024-06-11T12:06:43.384695
License: Public Domain

245 F.3d 809 (D.C. Cir. 2001)
Trans Union Corporation, Petitionerv.Federal Trade Commission, Respondent
No. 00-1141
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 6, 2001Decided April 13, 2001

[Copyrighted Material Omitted]
On Petition for Review of an Order of the Federal Trade Commission
Roger L. Longtin argued the cause for petitioner. With him  on the brief was Stephen L. Agin.
Lawrence DeMille-Wagman, Attorney, Federal Trade  Commission, argued the cause for respondent.  With him on  the brief were Debra A. Valentine, General Counsel, and  John F. Daly, Assistant General Counsel.
Before:  Edwards, Chief Judge, Ginsburg and Tatel,  Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge:

1
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.

2
* Petitioner Trans Union sells two types of products.  First,  as a credit reporting agency, it compiles credit reports about  individual consumers from credit information it collects from  banks, credit card companies, and other lenders.  It then  sells these credit reports to lenders, employers, and insurance  companies.  Trans Union receives credit information from  lenders in the form of "tradelines."  A tradeline typically  includes a customer's name, address, date of birth, telephone  number, Social Security number, account type, opening date  of account, credit limit, account status, and payment history. Trans Union receives 1.4 to 1.6 billion records per month. The company's credit database contains information on 190  million adults.

3
Trans Union's second set of products--those at issue in this  case--are known as target marketing products.  These consist of lists of names and addresses of individuals who meet  specific criteria such as possession of an auto loan, a department store credit card, or two or more mortgages.  Marketers purchase these lists, then contact the individuals by mail  or telephone to offer them goods and services.  To create its  target marketing lists, Trans Union maintains a database  known as MasterFile, a subset of its consumer credit database.  MasterFile consists of information about every consumer in the company's credit database who has (A) at least  two tradelines with activity during the previous six months, or  (B) one tradeline with activity during the previous six months  plus an address confirmed by an outside source.  The company compiles target marketing lists by extracting from MasterFile the names and addresses of individuals with characteristics chosen by list purchasers.  For example, a department  store might buy a list of all individuals in a particular area  code who have both a mortgage and a credit card with a  $10,000 limit.  Although target marketing lists contain only  names and addresses, purchasers know that every person on  a list has the characteristics they requested because Trans  Union uses those characteristics as criteria for culling individual files from its database.  Purchasers also know that every  individual on a target marketing list satisfies the criteria for  inclusion in MasterFile.

4
The Fair Credit Reporting Act of 1970 ("FCRA"), 15  U.S.C. §§ 1681, 1681a-1681u, regulates consumer reporting  agencies like Trans Union, imposing various obligations to  protect the privacy and accuracy of credit information.  The  Federal Trade Commission, acting pursuant to its authority  to enforce the FCRA, see 15 U.S.C.  1681s(a), determined  that Trans Union's target marketing lists were "consumer  reports" subject to the Act's limitations.  The FCRA defines  "consumer report" as:

5
[A]ny written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for

6
(A) credit or insurance to be used primarily for personal, family, or household purposes;

7
(B) employment purposes;  or

8
(C) any other purpose authorized under section 1681b of this title.

9
15 U.S.C.  1681a(d)(1).  Finding that the information Trans  Union sold was "collected in whole or in part by [Trans  Union] with the expectation that it would be used by credit  grantors for the purpose of serving as a factor in establishing  the consumer's eligibility for one of the transactions set forth  in the FCRA," and concluding that target marketing is not an  authorized use of consumer reports under section 1681b, In re  Trans Union Corp., 118 F.T.C. 821, 891 (1994), the Commission ordered Trans Union to stop selling target marketing  lists, id. at 895.

10
Trans Union petitioned for review.  In Trans Union Corp.  v. FTC, 81 F.3d 228 (D.C. Cir. 1996) ("Trans Union I"), we  agreed with the Commission that selling consumer reports for  target marketing violates the Act.  Id. at 233-34.  We nevertheless set aside the Commission's determination that Trans  Union's target marketing lists amounted to consumer reports. Id. at 231-33.  The Commission, we held, failed to justify its  finding that Trans Union's lists, by conveying the mere fact  that consumers had a tradeline, were communicating information collected for the purpose of determining credit eligibility. We found that the Commission had failed to provide evidence  to support the proposition that "the mere existence of a  tradeline, as distinguished from payment history organized  thereunder," was used for credit-granting decisions or was  intended or expected to be used for such decisions.  Id. at  233. (The parties' arguments in Trans Union I and in the  proceedings on remand focused on the relevance of the  information in the company's lists to consumer eligibility for  credit;  accordingly, the information's relevance to the other  uses the statute lists--such as determining eligibility for  insurance and employment--are not at issue in this case.  See  In re Trans Union Corp., Opinion of the Commission, No.  9255, slip op. at 16 n.20 (Feb. 10, 2000) ("FTC Opinion").)

11
On remand, following extensive discovery, more than a  month of trial proceedings, and an initial decision by an  Administrative Law Judge, the Commission found that Trans Union's target marketing lists contain information that credit  grantors use as factors in granting credit.  Accordingly, the  Commission concluded, the lists are "consumer reports" that  Trans Union may not sell for target marketing purposes. FTC Opinion at 33.  The Commission also rejected Trans  Union's argument that such a restriction would violate its  First Amendment rights.  Applying intermediate scrutiny,  the Commission found that the government has a substantial  interest in protecting private credit information, that the  FCRA directly advances that interest, and that the Act's  restrictions on speech are narrowly tailored.  Id. at 37-52. The Commission thus ordered Trans Union to "[c]ease and  desist from distributing or selling consumer reports, including  those in the form of target marketing lists, to any person  unless [the company] has reason to believe that such person  intends to use the consumer report for purposes authorized  under Section [1681b] of the Fair Credit Reporting Act."  In  re Trans Union Corp., Final Order, No. 9255 (Feb. 10, 2000). Trans Union again petitions for review.

II

12
As we pointed out in Trans Union I, the first element of  the FCRA's definition of consumer report--"bearing on a  consumer's credit worthiness, credit standing, credit capacity,  character, general reputation, personal characteristics, or  mode of living," 15 U.S.C.  1681a(d)(1)--"does not seem very  demanding," for almost any information about consumers  arguably bears on their personal characteristics or mode of  living.  See 81 F.3d at 231.  Indeed, Trans Union does not  challenge the Commission's conclusion that the information  contained in its lists meets this prong of the definition of  consumer report.

13
Whether the company's target marketing lists qualify as  consumer reports thus turns on whether information they  contain "is used or expected to be used or collected in whole  or in part for the purpose of serving as a factor in establishing the consumer's eligibility for [credit]."  15 U.S.C.   1681a(d)(1). According to the Commission, "a factor in establishing the consumer's eligibility for [credit]," id., includes any type of information credit grantors use in their  criteria for "prescreening" or in "credit scoring models."  See  FTC Opinion at 16-17.  "Prescreening" involves selecting  individuals for guaranteed offers of credit or insurance.  See  id. at 18;  see also Trans Union I, 81 F.3d at 234 (defining  "prescreening" as "the sale of a list of people preselected for  credit worthiness by some specified criteria, where the buyer  of the list agrees in advance to make a firm offer of credit to  each listed person").  "Credit scoring models" are statistical  models for predicting credit performance that are developed  by observing the historical credit performance of a number of  consumers and identifying the consumer characteristics that  correlate with good and bad credit performance.  See FTC  Opinion at 17.  Applying its prescreening/credit scoring model standard, the Commission found that Trans Union's lists  contain the type of information " 'used' and/or 'expected to be  used' ... as a factor in establishing a consumer's eligibility  for credit."  Id. at 15;  see also id. n.19.

14
Trans Union urges us to reject the Commission's interpretation of the Act in order to avoid what the company calls  "serious constitutional questions."  Pet'r Opening Br. at 9. In support, it cites DeBartolo Corp. v. Florida Gulf Coast  Building & Construction Trades Council, where the Supreme  Court refused to defer to the NLRB's interpretation of a  provision of the NLRA because the Court believed it raised  serious First Amendment problems.  485 U.S. 568, 574-77  (1988).  But as we demonstrate in Section III, infra, Trans  Union's constitutional arguments are without merit, so we  have no basis for rejecting the Commission's statutory interpretation on that ground.

15
Nor has Trans Union offered a basis for questioning the  Commission's statutory interpretation on other grounds.  The  company does not mention the Commission's interpretation of  the statute in the "Issues Presented For Review" section of  its brief.  Cf. Fed. R. App. P. 28(a)(5) (requiring that appellants' and petitioners' briefs state the issues presented for  review).  Although scattered language in the brief hints at a statutory interpretation challenge, that language appears in a  section entitled "The Record Does Not Support The Conclusion Reached By The Commission."  Trans Union has thus  failed to put the Commission on notice that it faced a nonconstitutional challenge to its interpretation of the statute.

16
We have the same reaction to the brief's occasional suggestions that the Commission's decision was arbitrary and capricious.  Not only do these suggestions appear in a section  entitled "The Commission's Interpretation Of FCRA Raises  Serious Constitutional Questions," see, e.g., Pet'r Opening Br.  at 19 (referring to "illogical contradictions"), but the list of  issues presented for review neither mentions the arbitrary  and capricious standard nor otherwise questions the reasonableness of the Commission's decision.

17
We thus turn to the one non-constitutional argument that  Trans Union clearly mounts:  that the Commission's decision  is unsupported by substantial evidence.  A footnote to the  title of this portion of its brief states:

18
The Order is replete with statements unsupported by the evidence....  The word limitation of [Federal Rule of Appellate Procedure] 32(a)(7) makes it impossible to address each such misstatement here.  It is the responsibility of the Commission's counsel, however, to ensure that the Court is not misled by the statements in the Order not supported by the evidence.

19
Id. at 21 n.7.  To bring a substantial evidence challenge,  however, Trans Union must do more than assert generally  that the decision is unsupported by substantial evidence.  It  must identify the specific findings it challenges and demonstrate that each finding is either unsupported by evidence or,  because the Commission unreasonably discounted contrary  evidence, unsupported by "the record in its entirety."  See  Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951). The 14,000 words permitted by Rule 32(a)(7) are more than  enough to accomplish this task.

20
Instead of challenging the Commission's findings regarding  specific target marketing products, Trans Union points to evidence relating to the general question of whether the  information in its target marketing lists is used to determine  credit worthiness.  This is not the question before us.  As we  indicate above, the Commission interprets "factor in establishing the consumer's eligibility for credit," 15 U.S.C.   1681a(d)(1), to include any information considered by lenders in prescreening, which, as two witnesses testified, can  involve consideration of criteria other than credit worthiness,  e.g., whether a given consumer is likely to respond to an offer  of credit.  Because Trans Union has not challenged the  Commission's interpretation of the statute, its argument that  the information the company sells is not actually used to  determine credit worthiness is beside the point.  Moreover,  Trans Union cites no testimony refuting the Commission's  finding that the information in its target marketing lists is  used in prescreening.

21
Not only has Trans Union thus failed to mount a proper  substantial evidence challenge to the Commission's finding  that lenders take list information into account in credit models and prescreening, but we have no doubt that the decision  does find support in the record.  Consider, for example,  Trans Union's "Master File/Selects" product line, which allows marketers to request lists based on any of five categories of information:  (1) credit limits (e.g., consumers with  credit cards with credit limits over $10,000), (2) open dates of  loans (e.g., consumers who took out loans in the last six  months), (3) number of tradelines, (4) type of tradeline (e.g.,  auto loan or mortgage), and (5) existence of a tradeline.  The  Commission cites testimony and other record evidence that  support its finding that lenders consider each of these five  categories of information in prescreening or credit scoring  models.  Beginning with credit limits, the Commission cites  the testimony of a statistician who builds credit scoring  models.  FTC Opinion at 19.  That witness explained that  scoring models rely in part on consumer utilization of credit,  calculated by dividing a consumer's current outstanding balance by the consumer's credit limit.  To support its finding  regarding open dates of loans, the Commission relied on the  testimony of a vice president of a company that builds credit scoring models.  Id. According to that witness, some scoring  models use the open date of the oldest tradeline in a consumer's credit file as a predictive characteristic.  The witness also  testified that some credit scoring models use the date of the  most recently opened tradeline to determine credit risk.  To  support its finding that information about the number of  tradelines in a consumer's credit file is a consumer report, the  Commission cites the testimony of a vice president in charge  of direct mail processing for a bank's credit card department  who explained that, in its credit making decisions, her bank  considers the number of tradelines consumers possess.  Id. at  20 n.30.  The Commission also points to record evidence  demonstrating that Trans Union itself uses the number of  tradelines as a predictive characteristic in its credit scoring  models.  Id. at 20.  As to the type of tradeline, the Commission cites the testimony of representatives of companies that  design credit models who explained that some credit scoring  models, including two used by Trans Union, take into account  possession of a bank card.  FTC Opinion at 21-22.  One  witness testified that Trans Union scoring models also consider possession of a finance company loan to be a predictive  characteristic.  Another witness, this one representing a  credit card company, testified that his company's scoring  models assign points for possession of a mortgage, retail  tradeline, or bank card.  Id. at 21.

22
The record also contains sufficient evidence to support the  Commission's resolution of the issue remanded by Trans  Union I:  whether mere existence of a tradeline is "a factor in  credit-granting decisions." 81 F.3d at 233.  An employee of a  bank that issues credit cards testified that to be eligible for  credit, an individual must have at least one tradeline.  FTC  Opinion at 25.  The vice president of credit scoring at  another credit card issuer testified that the very first question her company asks in prescreening is whether the consumer has a tradeline that has been open for at least a year. Challenging the implications of this testimony, Trans Union  argues that banks ask whether consumers have tradelines not  because the existence of a tradeline is itself a factor in  determining credit eligibility, but because banks want to determine whether there is enough information in consumer  files to make credit eligibility determinations.  This may be  true.  But as we explain above, our task is limited to determining whether substantial record evidence supports the  Commission's finding that banks consider the existence of a  tradeline as a factor in prescreening or credit models.  Because the record contains such evidence, we have no basis for  questioning the Commission's decision.

23
Trans Union has identified one potentially troubling inconsistency in the Commission's decision.  As the company  points out, record evidence demonstrates that lenders consider names and addresses when prescreening consumers for  guaranteed offers of credit, yet the Commission does not  prohibit the sale of names and addresses for target marketing  purposes.  Regarding addresses, the Commission's opinion  says, "[a]lthough some lenders will not extend credit to  consumers with a P.O. Box address, we do not find that the  P.O. Box feature bears on 'credit worthiness, credit standing,  credit capacity, character, general reputation, personal characteristics or mode of living.' "  Id. at 31 n.50.  It is not clear,  however, why receiving mail at a post office should not be  considered an aspect of an individual's "mode of living."  We  need not resolve this issue, however, because Trans Union  presents neither an arbitrary and capricious nor a statutory  interpretation challenge to the Commission's failure to prohibit the sale of names and addresses.  See supra at 814-15.

24
Nor must we resolve any inconsistency between the Commission's decision in this case and a 1993 consent agreement  between the Commission and a Trans Union competitor,  TRW (now Experian).  In contrast to the Commission's decision here, that agreement allowed TRW to sell information  about consumers' ages to target marketers.  Again, although  this might suggest that the Commission has acted arbitrarily  and capriciously in treating similarly situated entities differently, Trans Union has not made such a challenge.  The  Commission thus seems correct that "[t]he TRW Consent is  not before us in this matter and it is without precedential  effect on this opinion."  FTC Opinion at 16 n.22.

III

25
Trans Union's constitutional challenge consists of two arguments.  It claims first that the FCRA is vague, thus running  afoul of the due process guarantee of the Fifth Amendment. Trans Union also argues that the statute violates the free  speech guarantee of the First Amendment because it restricts  its ability to disseminate information.

26
Beginning with the Fifth Amendment challenge, we are  guided by Village of Hoffman Estates v. Flipside, Hoffman  Estates, Inc., 455 U.S. 489, 498 (1982).  "[L]aws," the Court  said, must not only "give the person of ordinary intelligence a  reasonable opportunity to know what is prohibited," but in  order to prevent "arbitrary and discriminatory enforcement,"  they must also "provide explicit standards for those who  apply them."  Id. (quoting Grayned v. City of Rockford, 408 U.S. 104, 108-09 (1972)).  Emphasizing that these principles  should not "be mechanically applied," the Court held that  "economic regulation is subject to a less strict vagueness test  because its subject matter is often more narrow, and because  businesses, which face economic demands to plan behavior  carefully, can be expected to consult relevant legislation in  advance of action."  Id.  The "regulated enterprise," the  Court added, "may have the ability to clarify the meaning of  the regulation by its own inquiry, or by resort to an administrative process."  Id. Finally, "the consequences of imprecision are qualitatively less severe" when laws have "scienter  requirement[s]" and "civil rather than criminal penalties." Id. at 499.

27
Applying this standard, we see no merit in Trans Union's  vagueness argument.  To begin with, because the FCRA's  regulation of consumer reporting agencies is economic, it is  subject to "a less strict vagueness test."  Id. at 498.  Moreover, Trans Union has "the ability to clarify the meaning of  the [FCRA]," id., through the Commission's advisory opinion  procedures.  See 16 C.F.R. 1.1-1.4 (establishing general  procedures for obtaining advisory opinions);  id.  2.41(d)  (establishing procedures for obtaining guidance regarding  compliance with FTC orders).  Selectively quoting from the Commission's regulations, the company disputes the usefulness of advisory opinions, suggesting that they can be  changed at any time and that "the Commission expressly  reserves the right upon rescission of an earlier opinion to  commence an enforcement proceeding."  Pet'r Reply Br. at  10.  The relevant regulation states as follows (the sentences  Trans Union omits are in italics):

28
Any advice given by the Commission is without prejudice to the right of the Commission to reconsider the questions involved and, where the public interest requires, to rescind or revoke the action.  Notice of such rescission or revocation will be given to the requesting party so that he may discontinue the course of action taken pursuant to the Commission's advice.  The Commission will not proceed against the requesting party with respect to any action taken in good faith reliance upon the Commission's advice under this section, where all the relevant facts were fully, completely, and accurately presented to the Commission and where such action was promptly discontinued upon notification of rescission or revocation of the Commission's approval.

29
16 C.F.R.  1.3(b) (emphasis added).  Although the next  subsection of the regulation states that "[a]dvice rendered by  the staff is without prejudice to the right of the Commission  later to rescind the advice and, where appropriate, to commence an enforcement proceeding," id.  1.3(c), the portion of  the regulation omitted by Trans Union makes quite clear that  the company can safely rely on advisory opinions without fear  of penalty should the Commission later change its mind.

30
The FCRA does not fit quite so comfortably under the  other Hoffman Estates criteria.  Although the Act does contain a clear scienter requirement for the imposition of civil  fines, see, e.g., 15 U.S.C.  1681s(a)(2)(A) ("knowing"), it also  provides that anyone who negligently violates the Act may be  liable to injured consumers for actual damages.  Id.   1681o(a).  The statute also authorizes criminal penalties. Id.  1681r (providing for possible imprisonment for "[a]ny  officer or employee of a consumer reporting agency who knowingly and willfully provides information concerning an  individual from the agency's files to a person not authorized  to receive that information").  Even given these distinctions,  however, because of the extremely clear process for "clarify[ing] the meaning of the regulation," Hoffman Estates, 455 U.S. at 498, Trans Union simply does not face a due process  risk of prosecution for conduct it could not have known to be  illegal.

31
Trans Union's First Amendment challenge fares no better. Banning the sale of target marketing lists, the company says,  amounts to a restriction on its speech subject to strict scrutiny.  Again, Trans Union misunderstands our standard of  review.  In Dun & Bradstreet, Inc. v. Greenmoss Builders,  Inc., 472 U.S. 749 (1985), the Supreme Court held that a  consumer reporting agency's credit report warranted reduced  constitutional protection because it concerned "no public issue."  Id. at 762.  "The protection to be accorded a particular  credit report," the Court explained, "depends on whether the  report's 'content, form, and context' indicate that it concerns  a public matter."  Id. n.8.  Like the credit report in Dun &  Bradstreet, which the Supreme Court found "was speech  solely in the interest of the speaker and its specific business  audience," id. at 762, the information about individual consumers and their credit performance communicated by Trans  Union target marketing lists is solely of interest to the  company and its business customers and relates to no matter  of public concern.  Trans Union target marketing lists thus  warrant "reduced constitutional protection."  Id. n.8.

32
We turn then to the specifics of Trans Union's First  Amendment argument.  The company first claims that neither the FCRA nor the Commission's Order advances a  substantial government interest.  The "Congressional findings and statement of purpose" at the beginning of the FCRA  state:  "There is a need to insure that consumer reporting  agencies exercise their grave responsibilities with ... respect  for the consumer's right to privacy."  15 U.S.C.  1681 (a)(4). Contrary to the company's assertions, we have no doubt that this interest--protecting the privacy of consumer credit information--is substantial.

33
Trans Union next argues that Congress should have chosen  a "less burdensome alternative," i.e., allowing consumer reporting agencies to sell credit information as long as they  notify consumers and give them the ability to "opt out." Pet'r Opening Br. at 43-44.  Because the FCRA is not  subject to strict First Amendment scrutiny, however, Congress had no obligation to choose the least restrictive means  of accomplishing its goal.

34
Finally, Trans Union argues that the FCRA is underinclusive because it applies only to consumer reporting agencies  and not to other companies that sell consumer information. But given consumer reporting agencies' unique "access to a  broad range of continually-updated, detailed information  about millions of consumers' personal credit histories," FTC  Opinion at 1, we think it not at all inappropriate for Congress  to have singled out consumer reporting agencies for regulation.  As we explained in Blount v. SEC, "a regulation is not  fatally underinclusive simply because an alternative regulation, which would restrict more speech or the speech of more  people, could be more effective."  61 F.3d 938, 946 (D.C. Cir.  1995).  The primary purpose of underinclusiveness analysis is  to "ensure that the profferred state interest actually underlies  the law, [so] a rule is struck for underinclusiveness only if it  cannot fairly be said to advance any genuinely substantial  governmental interest because it provides only ineffective or  remote support for the asserted goals, or limited incremental  support."  Id. (internal citations omitted).  To survive a First  Amendment underinclusiveness challenge, therefore, "neither  a perfect nor even the best available fit between means and  ends is required."  Id. The FCRA easily satisfies this standard.

35
Trans Union contends that the statute is underinclusive for  another reason, i.e., because it allows the sale of consumer  reports for the purpose of guaranteed offers of credit or  insurance.  Trans Union I disposes of this argument:

36
[B]eing singled out for a firm offer of credit is exactly the sort of thing the Act seeks to promote, and a purpose for which it is quite reasonable to infer the consumer's implicit waiver or consent.  Moreover, prescreening and the guaranteed offers of credit it spawns can only take place through the use of consumer reports, whereas the use of credit data for non-credit-related mailings is at most helpful to those ends.

37
81 F.3d at 234.

IV

38
Having considered and rejected Trans Union's other arguments, we deny the petition for review.

39
So Ordered.