A buyer who refused to give up a discount that was doubled in error can pursue privacy and fair reporting claims against the Kentucky dealership that made the mistake and later accessed his credit file.
Bob Smith Chevrolet Inc. of Louisville, Ky., "did not have a permissible purpose" to access the report and in so doing violated the Fair Credit Reporting Act, U.S. District Judge John Heyburn II ruled.
Heyburn said Christopher Smith is entitled to a trial to try to prove that the dealership's conduct was deliberate and violated his privacy rights.
The dealership denies the allegations.
The lesson for dealerships is that "everybody needs to be mindful of the Fair Credit Reporting Act and give it careful consideration," says Mark Fenzel of Louisville, general counsel to Bob Smith Chevrolet.
The controversy involved a new 2001 GMC Suburban. As an employee of a General Motors supplier, Smith was entitled to a discount.
The dealership calculated the discount as $5,227. But when it discovered that it had inadvertently doubled the figure, it asked Smith to pay the difference or cancel the deal.
When Smith declined, the dealership refused to transfer title or pay the outstanding loan on the trade-in. It accessed his credit report during that disagreement.
"There was no legitimate business reason," says Smith's lawyer, David Mour of Louisville. "They were trying to gain some kind of advantage."
Fenzel disagrees. "There was still a legitimate transaction that the parties were involved in" at the time his client accessed the report, he says.
In an initial state court lawsuit, Smith sued for breach of the sales contract. A jury found in his favor.
The second lawsuit seeks damages for alleged credit and privacy violations.
In his decision, Heyburn said the dealership had no valid reason to check Smith's report. "Instead, Smith Chevrolet accessed the credit report to determine how much additional money it could collect, apart from what the two parties agreed upon in a standard business transaction," Heyburn said. "Almost certainly, it did not access the report for a reason beneficial to the consumer."
The decision left open whether the violation was willful. If so, Smith may be entitled to punitive and compensatory damages.
Heyburn said Smith had a right to keep his report private but found it uncertain whether the dealership intentionally invaded his privacy and, if so, "whether that invasion was highly offensive to a reasonable person."
The judge said a jury should decide whether the dealership acted deliberately or only negligently.
A trial is scheduled for Oct. 7.
You can send e-mail to Eric Freedman at [email protected]