Commercial Credit Bureaus - The Right To Privacy and State Action

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Richard H. Goldstein & Mark S. Brodie, Commercial Credit Bureaus: The Right to
Privacy and State Action, 24 AM. U. L. REV. 421 (1975).
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Richard H. Goldstein & Mark S. Brodie, Commercial Credit Bureaus: The Right to
Privacy and State Action, 24 Am. U. L. Rev. 421 (1975).
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Goldstein, R. H., & Brodie, M. S. (1975). Commercial credit bureaus: the right to
privacy and state action. Ameircan University Law Review, 24(2), 421-490.
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Privacy and State Action," Ameircan University Law Review 24, no. 2 (Winter 1975):
421-490
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COMMERCIAL CREDIT BUREAUS: THE
RIGHT TO PRIVACY AND STATE ACTION
"Businessman David Weinberger, after being orally promised a
job with IBM in 1957, was refused employment after an investiga-
tion by Retail Credit Corp., the giant of the reporting industry,
wrongly stated that Weinberger had been the business partner of a
man indicted for mail fraud ....
"Last year a professor's wife in Huntsville, Texas lost her auto
insurance because her credit bureau listed her as an alcoholic. She
never drinks.
"A Fort Wayne, Indiana man sued Retail Credit in 1964 because
he lost a job promotion due to a report that falsely stated the man
had spent a year in prison for a car sales scheme.
"Bruce McGrath, a businessman in Ontario, Canada, was denied
a series of jobs-after having been told orally that he was
hired-because a report by the branch office of an American-based
credit firm said he had been fired from his previous job and had
'loose morals.' After Maclean's magazine began looking into
McGrath's case, a new credit report by the same firm reported that
McGrath had actually resigned from his previous job to seek a bet-
ter one. His morals? 'No criticism of subject's reputation or asso-
ciates.'
"Last year an Oklahoma man went into the Tulsa office of Retail
Credit Co. to find out why he had been denied insurance. He
brought with him Paul Polin, a management consultant who has
been leading the fight for regulation of credit bureaus since 1960.
They found 12 errors in the report, as well as obsolete information
that the law requires to be deleted. Next day the manager of the
branch office phoned the complainant at home and told him: "If you
stop associating with Paul Polin, we'll make sure you have an A-1
report.' "1
The experience of these private citizens with the credit reporting
industry is neither unique nor unexpected.2 Commercial credit bu-
1. Hearings on S. 2360 to Amend the Fair Credit Reporting Act, Before the
Subcomm. on Consumer Credit of the Senate Comm. on Banking, Housing and
Urban Affairs, 93d Cong., 1st Sess. 636-37 (1973) [hereinafter cited as Hearings
on S. 2360].
2. In his testimony before Senator Proxmire's Subcommittee on Consumer
Credit in February, 1974, Mr. Dick Riley, a former supervisor of long experience
422 THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 24:421
reau investigators are subjected to intense pressure by their respec-

tive companies to satisfy unrealistically high daily production quo-
tas. Investigators are expected to produce between fifteen and
twenty credit reports a day,3 whereas
an average field representative should produce an average of 6 to 10
reports per day if he complied with the procedures outlined in the
company manual.'
Indeed, when it is recognized that commercial credit companies
emphasize the quantity of production, as opposed to the quality
of the reports, and encourage, if not require, the reporting of
adverse information,5 it is not surprising that investigators must
resort to subterfuge6 and short-cut methods of investigation and
with Retail Credit Company of Atlanta, Georgia [hereinafter referred to as RCC]
related a shocking illustration of customary credit bureau practice not to verify old,
adverse information which is either a matter of public record or a part of the credit
bureau's old reports:
I know, personally, of a bank president who lost his job when he applied
for a large amount of insurance naming the bank as the beneficiary. The
(credit) report showed that he was associating with a woman other than his
wife and he drank quite a bit. He was turned down by this insurance com-
pany and reapplied to another. The same field representative (of the credit
bureau) copied the old report and, once again, he was refused insurance
coverage. He then applied to two or three other insurance companies and this
time, it was considered a "copy" case whereas [sic] a girl in the (credit
bureau) office retypes the report and the office receives a nominal charge for
this service. This particular bank president was fired from his job as he was
considered uninsurable by the bank officials.
Hearings on Amending the Fair Credit Reporting Act Before the Subcomm. on
Consumer Credit of the Senate Comm. on Banking, Housing and Urban Affairs,
93d Cong., 2d Sess. 5-6 (1974) [hereinafter cited as Hearings on Amending the
FCRA].
3. Hearingson Amending the FCRA, supra note 2, at 2, 4, 6, 8, 12, 39, 40. It is
clear from the testimony given at these Hearings that RCC has a quota system
requiring 18 to 20 reports per day from its investigators.
4. Id. at 6.
5. Policy manuals and statements from those in management positions
notwithstanding, Retail Credit Co. emphasizes the quantity of production,
not the quality of the reports. Adverse information is encouraged, if not
required. And this adverse information. . . was. . . based upon hearsay,
gossip and rumor. . . . [S]uch falsehoods were often expanded by innuendo
into full-blown reports that an insurance company would use to turn down a
person who might otherwise be a good risk and good customer.
Id. at 12-13 (statement of Len 0. Holloway, former RCC investigator).
6. The following testimony of Mr. Mark S. Brodie and Mr. William F. Boaz,
former Retail Credit Company investigators, illuminates this practice:
1975] COMMERCIAL CREDIT BUREAUS
reporting7 which must of necessity seriously impair the accuracy

and reliability of the resulting credit reports.
Credit reports are usually initiated for purposes of retail credit,
personnel selection, and insurance. The information contained in
these credit ratings includes, among other things, the person's ad-
dress, family status, salary, place of employment, credit history, the
places where the person had charge accounts and what his payment
record has been.' In addition to matters of public record, such as
court judgments, liens, and indictments,' the personnel credit rat-
ing will include remarks of former employers and reasons for job
Senator PROXMIRE. What techniques or shortcuts are used by inspectors to
meet their daily production goals?
Mr. BRODIE. I think that is what I have described.
Senator PROXMIRE. Zinging and telephoning, are those the principal ones?
Mr. BRODIE. Yes, to my knowledge.
Mr. BOAZ. You [the credit company investigator] contact the insured, or the
applicants by telephone and maybe you say you are conducting a survey for
the county and you want to know how many schoolchildren are in the
home. . . . Your primary objective is, does he have any youthful driv-
ers ....
Senator PROXMIRE. How common is the use of subterfuge in the interview
techniques?
Mr. BOAZ. Daily.
Senator PROXMIRE. That is to get people to talk?
Mr. BOAZ. It is a shortcut in order to maintain more volume. Or, to meet the
volume that is required of you.
Mr. BRODIE. Many people simply won't talk to you if they know you are from
Retail Credit, so you tell them you are from the insurance company or from
some other source.
Id. at 23-24.
7. Id. at 8-9. See also text accompanying notes 46-48 infra.
8. The value of employing merchants and banks as a source of information has
been severely questioned on the ground that it is illogical to assume that present
ability to meet current credit payments implies a capacity to handle additonal
debts. This is particularly true when credit bureau reports do not reveal a subject's
net worth or total debts because many creditors are not subscribers. Also, delin-
quency in payment often arises over bona fide disputes between the consumer and
creditor, and need not involve any financial irresponsibility. Countryman, The
DiminishingRight of Privacy: The PersonalDossier and the Computer, 49 TExAS
L. Rnv. 837, 840 (1971) [hereinafter cited as Countryman].
9. See Hearings on Commercial Credit Bureaus Before the Special Subcomm.
on Invasion of Privacy of the House Comm. on Government Operations, 90th
Cong., 2d Sess. 125 (1968) [hereinafter cited as Hearings on Commercial Credit
Bureaus]; Hearings on S. 823 Before the Subcomm. on FinancialInstitutions of
the Senate Comm. on Banking and Currency, 91st Cong., 1st Sess. 91 (1969)
[hereinafter cited as Hearingson S. 823].
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 24:421
changes.' 0 Insurance credit ratings also normally contain informa-

tion concerning the applicant's marital life, private morals, extra-
marital affairs, and drinking habits."
Credit agencies are big business.' 2 Mr. John H. F. Shattuck, Staff
Counsel, American Civil Liberties Union, in his testimony before
Senator Proxmire's Subcommittee on Consumer Credit, has esti-
mated that the total annual receipts of consumer credit reporting
agencies exceeds one billion dollars.'3 The Associated Credit Bur-
eaus of American has over 2,200 member bureaus, servicing 400,000
credit grantors in 36,000 communities across the nation and in many
foreign countries. Its members maintain files on more than 110 mil-
lion individuals, and in 1967 they issued 97.1 million reports." Ac-
cording to a report in the Wall Street Journal, Associated Credit
Bureaus is working with IBM Corporation in designing a nationwide
information system that will make available all of Associated's 110
million files to any local bureau.' 5 When asked how long it would
take before every American's name would be listed with Credit Data
Corporation, the nation's second largest credit reporting firm," its
president replied, "We regard it as approximately a five-year job."'"
In view of the practices and procedures" employed by commercial
credit bureaus to investigate highly personal areas," the bureau's
10. Hearings on S. 823, supra note 9, at 91.

11. Id. at 178. Commercial credit bureaus also seek information on the individ-
ual's income, domestic relations, political affiliations, living conditions, and gen-
eral reputation. See A. MILLER, THE ASSAULT ON PRIVACY 69-70 (1971) [hereinafter
cited as MmLER]. See also forms used by RCC, reprintedin Hearings on H.R. 16340
Before the Subcomm. on Consumer Affairs of the House Comm. on Banking and
Currency, 91st Cong., 2d Sess. 478-85 (1970).
12. For example:
The Retail Credit Co. is the largest investigative reporting company in the
United States; it has over 1,800 offices in all 50 States; it has dossiers on 46
million people, it employs over 15,000 persons including 8,500 investigators
and it prepares approximately 35 million reports a year including 15 million
investigative reports for 70,000 business customers, for which it receives $200
million a year in revenue or an average of less than $6 per report.
Hearings on Amending the FCRA, supra note 2, at 1-2.
13. Hearingson S. 2360, supra note 1, at 637-38.
14. Hearingson Commercial Credit Bureaus, supra note 9, at 5.
15. Wall Street Journal, Feb. 5, 1968, at 1, col. 6.
16. Credit Data Corporation has 27 million files and adds approximately seven
million new dossiers each year. Hearings on S. 2360, supra note 1, at 637.
17. Wall Street Journal, Feb. 5, 1968, at 1, col. 6.
18. See text accompanying notes 30-58 infra.
19. As an example of the highly personal information which may be compiled
quota systems or at least incentive plans requiring investigators to

find adverse or derogatory information, 0 and the serious conse-
quences' which result from the reporting of private information
irrelevant to the determination of credit worthiness, 22 this comment
proposes that an individual has a fundamental right 23 to informa-
tional privacy which may be asserted against commercial credit
bureaus regulated by the FCRA. First, the practices and procedures
of the Retail Credit Company (RCC) of Atlanta, Georgia, will be
examined, based on the personal experience of one of the authors
during his employment with RCC. 4 Second, some deficiencies in
the Fair Credit Reporting Act2 in protecting the fundamental right
to informational privacy will be considered.28 Third, it will be shown
that credit reporting agencies invade areas constitutionally pro-
tected from governmental invasion.27 Fourth, the quasi-public na-
ture of commercial credit bureaus will be examined in light of their
close relationship to and regulation by federal and state govern-
ments.2 This inquiry will be pursued in order to demonstrate the
requisite governmental involvement to bring the conduct of credit
under the FCRA, section 1681a(a) permits the gathering of information related to
an individual's character, general reputation, personal characteristics, and mode
of living. Credit reports frequently contain information not only regarding a per-
son's financial status (bank accounts, charge accounts, bill-paying habits), but also
include information concerning the quality of his marriage, his drinking habits,
"his IQ, high school attendance record and how the subject is regarded as to
'character, habits and morals.'" Note, ProtectingPrivacy in Credit Reporting, 24
STAN. L. Rlv. 550, 552 (1972) [hereinafter cited as Protecting Privacy], quoting
Hearings on Commercial Credit Bureaus, supra note 9, at 9.
20. Hearings on Amending the FCRA, supra note 2, at 12, 28, 38, 40.
21. Recently, one commentator has delineated three ways in which credit bur-
eaus affect an individual's right to privacy:
(1) through dissemination of private facts about the individual; (2) through
damage caused to our political and social structure through fear of such
dissemination; and (3) through fear of-what can best be termed "irrational
discrimination" on the basis of information normally considered private.
ProtectingPrivacy, supra note 19, at 553-54. For a further discussion of the per-
sonal damage which may result from the disclosure of highly private information
see notes 110-118 & accompanying text infra.
22. See text accompanying notes 12-15 supra, and note 64 infra.
23. See text accompanying notes 95-101 supra.
25. Fair Credit Reporting Act, 15 U.S.C. §§ 1681-81t (1970) [hereinafter re-
ferred to as FCRA].
bureaus within the ambit of the fifth and fourteenth amendments. 21
I. PRACTICES AND PROCEDURES

The Retail Credit Company was incorporated in Georgia in 1899.
The purpose of the corporation was stated to be. "[To] supply local
merchants with reliable information about people seeking to do
business on a credit basis." 30 Since then, however, the company has
greatly broadened its investigative horizons, and it now accepts a
national clientele that calls for detailed reports in such areas as
insurance applications and claims, deaths, credit reports, and per-
sonnel background. Nevertheless, insurance-related reports, which
RCC claims can be divided among health, property, and casualty
companies, still account for 80 percent of RCC business.3 '
RCC has over 1,000 branch offices across the nation, each of which
operates in a similar manner, with the exception of small town
branches which necessarily function somewhat differently. The fol-
lowing description of the Washington, D.C., office where one of the
authors of this comment was once employed, exemplifies the opera-
tion of a typical RCC branch office.
The Washington office can be divided into two operations, that
of the District Office itself and that of the Regional Vice President's
Office. The regional office contains some sales representatives for
the Middle-Atlantic region in addition to the corporate officers.
The District Office produces all reports originating in Washing-
ton, D.C., and the immediate Maryland suburbs. The staff consists
of approximately 60 employees, of which about 30 are investigators,
15 typists, and 15 administrators and supervisors. In charge are one
branch manager, one office manager, three route supervisors, and
one training supervisor. The branch manager is a sales representa-
tive who sells contracts to the various underwriters and businesses
in the District of Columbia area that seek the kind of services sup-
plied by RCC. The function of the office manager is to maintain
29. Two commentators have briefly considered the question of whether the con-
duct of credit bureaus constitutes a form of impermissible state action. See Note,
Credit Investigationsand the Right to Privacy: Quest for a Remedy, 57 GEo. L.J.
509, 521-22 (1969) [hereinafter cited as Credit and the Right to Privacy];
ProtectingPrivacy, supra note 19, at 556-57 n.49.
30. Hearings on S.2360, supra note 1, at 101.
31. Interview with former Routine Reports Division Manager, RCC, Washing-
ton, D.C., office, in Washington, D.C., January 9, 1974. W. Lee Burge, President
of RCC, states that insurance companies account for 84 percent of RCC's volume.
Hearings on S. 2360, supra note 1, at 101.
19751 COMMERCIAL CREDIT BUREAUS
control over the office and production rates. The route supervisors
do some investigations themselves, but, for the most part, oversee
the investigators in each of the areas of service that RCC offers its
customers. Finally, the training supervisor is responsible for break-
ing in all new investigators and overseeing them during their train-
ing periods.2
RCC maintains a small room full of the various forms on which
completed credit reports are typed. There are over 200 such forms,
and RCC claims that it continuously revises each one of them ac-
cording to the immediate needs of the client. In addition to these
forms, there is an array of what are called noteforms. These are used
by the investigator while he is "on the street" conducting an investi-
gation and contain a summary of the information required for a
specifie type of report and provide spaces for the appropriate an-
33
swers.
Retail Credit Company is dependent upon a large background
information filing system. All prior investigations are kept on file in
the local office in which they were completed, while copies of files
from other offices are often kept in the field office serving an area
to which an investigatee has moved. One entire wall of the Washing-
ton office is lined with filing cabinets containing approximately
30,000 individual files.3 4 The clerks go to these files every morning
with new cases referred to the District office to determine if there
are any previous reports on the investigatee. According to the
branch manager of the Washington office, it is "company practice"
to have these clerks systematically and continuously go through the
files to insure that every file which has been maintained for thirteen
months or more is destroyed. 5 However, it is doubtful that such
32. The training supervisor also has a caseload of his own to maintain. See
Hearings on Amending the FCRA, supra note 2, at 10 (statement of Mark S.
Brodie).
33. Hearings on S. 2360, supra note 1, at 68 (statement of W. Lee Burge).
34. This figure is based upon an estimate by the authors. The Washington office
filing cabinets number approximately 40, with four drawers per cabinet. The fig-
ures have not been confirmed, but the authors' sources within RCC state that this
estimate is probably quite conservative.
35. Interview with Clint Shaeffer and James Keating, Regional Vice President
and office manager respectively, RCC, at National Democratic Club, Washington,
D.C., February, 1974. The Fair Credit Reporting Act requires that, except for
consumer bankruptcy, which may be reported for 14 years, adverse information
more than seven years old must be destroyed. 15 U.S.C. §§ 1681(c)(a)(1)-(6),
1681k(1) & (2) (1970). See also Note, The Fair CreditReporting Act, 56 MINN. L.
REv. 819 (1972).
destruction is completed on anything more than a random basis.

There is no system for recording the age of reports except the date
stamped on the file itself. Systematic destruction would necessitate
checking every file periodically, and in all probability the clerks
only pull an old file if they chance upon it. During the course of his
employment with RCC, one of the authors of this comment came
upon files that were several years old, and which had been added
to several times but never removed.
RCC reflects the widely held belief that credit reports are essen-
tial, both to protect creditors and the consumer. 6 It believes that
such reports eliminate poor risks and provide a basis for surcharging
others .3 Ideally this should result in lower premiums for most in-
sureds than would otherwise be the case.3 The substance of one of
these supposedly cost-saving investigations will now be examined.
A. Investigative Procedures
This analysis follows the typical request by a large corporate un-
derwriter for information from RCC. After an insurance salesperson
explains to the prospective customer the need for insurance, the
various policies and their costs, he or she will ask the prospective
client to sign a standard form contract. Some of those contracts
contain a clause providing that the insured "consents" to an investi-
gation prior to having the insurance issued. 39 Acting on this consent,
In hearings on credit company practice, the RCC president noted:

We have a regular system of file destruction. All files are reviewed over a
twelve month cycle, and those having reached a certain age are de-
stroyed. . . . Our home office requires monthly reports on the destruction of
old files.
Hearings on S. 2360, supra note 1, at 107 (testimony of W. Lee Burge, which the
authors were unable to confirm as being standard operating procedure in any office
of RCC that was checked).
36. There is unanimous agreement that the business information system
is a necessary part of a mobile society in which consumers move freely from
place to place. Daily, and quickly, business reporting agencies are able to
verify and report the integrity and the trustworthiness of the overwhelming
majority of consumers.
Hearings on S. 2360, supra note 1, at 57 (statement of W. Lee Burge).
37. Id. at 58, where W. Lee Burge speaks on behalf of the reporting agencies as
well as the insurance companies.
38. Id. at 58-61, where again Burge is speaking on behalf of both industries.
39. The FCRA provides that the subject of an investigative report must be
notified of the report request. 15 U.S.C. § 1681d(a)(1) (1970). However, the individ-
ual's only recourse to prevent the preparation of the investigative report is to
terminate his dealings with the party ordering the report, thus eliminating the
the insurance salesperson returns to the office with the insurance

contract and fills out another form requesting that RCC investigate
the client. That form arrives sometime later at the appropriate RCC
field office. The slip of paper on which the insurance company's
request is printed designates which type of form the investigator
should utilize in conducting the investigation, what amount of in-
surance is requested, the names and addresses of the insured, his
wife and children, and prior addresses."
The investigator then takes his file of cases, with appropriate
noteforms attached, and goes out into the field. To satisfactorily
complete an investigation, the investigator may go to the con-
sumer's address ind question him or a member of his family plus
one neighbor, or he may question two neighbors. RCC asserts that
whenever adverse information is thereafter developed, additional
outside sources are then contacted for corroboration. 4' At the very
least, then, the investigator's duty is to contact two individuals, one
of whom must be outside of the investigatee's immediate family.
There are certain investigations, such as "character financial" re-
ports, which require two outside sources and specify that the inves-
tigator will not contact the investigatee or any member of his fam-
ily. In these cases, the investigator is supposed to contact two neigh-
bors, or former employers, friends, or bankers.
legitimate business need for the report. See Protecing Privacy, supra note 19. S.
2360 purports to amend section 1681 by requiring authorization from the subject
of the investigation. The amendment states:
A person may not procure, or cause to be procured an investigative consumer
report on any consumer unless that consumer has given a specific and dated
and separately signed affirmative written indication of his authorization of
such an investigative consumer report after receiving clear and conspicuous
written disclosure to him of the methods and scope of the investigation. Such
disclosure shall include:
(1) a list of all questions to be asked in the investigation and the likely sources
to be contacted in the investigation; and,
(2) a blank copy of any standard questionnaire or other similar form to be
used in the investigation.
S. 2360, 93d Cong., 1st Sess, §606 (1973).
40. RCC automatically transfers credit information files from city to city when
the credit application shows a former address in a different community. See Hear-
ings on S. 2360, supra note 1, at 66 (statement of W. Lee Burge).
41. Id. at 66-67, 106. Adverse information is broadly described by Mr. Burge
as related to the individual transaction. For example, the distance that a man
drives to work may adversely affect his automobile insurance rates. A hazardous
occupation, such as radiation therapist, may affect his life insurance premiums.
Mr. Burge concludes his definition with the statement that "the use of the term
adverse information is a misnomer." Id. at 67.
In an eight-hour day, part of which is spent in the office, the RCC

investigators are supposed to do 15 or 20 such cases. If all the resi-
dences and places of business were within a small radius of one
another, this might be possible. However, that is rarely, if ever, the
case. Investigatees are usually some distance apart, and persons to
be contacted are often not at home when the investigator calls.
Thus, as a. practical matter, even if the investigator spent a full
eight hours in the field, it is unlikely he could complete his daily
assigned case load. At the very best, RCC's statements as to the
time it takes to complete a typical day's investigations are based on
all of the contacted individuals being home when the investigator
arrives.
Additionally, an investigator must decide whether each case be-
longs in a "protective" or "declinable" category. The term "protec-
tive" describes what every supervisor insists must comprise 40 per-
cent or more of each investigator's cases.4" Protectives are roughly
defined categories of consumers, such as single women, college stu-
dents, male drivers under twenty-five, aliens, those with no visible
source of income, those overinsured, those living in a poor neighbor-
hood or a high crime area, and those with any other characteristics
an investigator might consider as indicia of "poor risks." The term
"protective" embodies a rather vague concept which signifies some-
thing different to each investigator. It is, in effect, RCC's catchall
phrase for effective investigations.43 It is an attempt to both define
categories in which the risk is increased greatly, and to warn the
underwriter that the investigator has found something considered
out of the ordinary. The investigator is told that at least six percent
of his cases must be labeled "declinable."" Declinable categories
42. Some dispute exists concerning the protective and declinable categories.
Messrs. Boaz, Brodie, and Holloway, all former RCC employees, testified that such
categories do exist. The form 930 supports that testimony because it has blanks
for percentages of cases that fall into each category. See Hearings on S. 2360,
supra note 1, at 31-33. This has also been noted by several other commentators.
See, e.g., Foer, The PersonalInformation Market, 2 LOYOLA LAW STUDENTS CON-
SUMER J. 37 (1974), reprinted in Hearings on S. 2360, supra note 1 at 695
[hereinafter cited as Foer]. Mr. Burge argues that while percentages of declinable
and protective reports may exist, RCC does not arbitrarily attempt to fill certain
goals. Hearings on S.2360, supra note 1, at 66-67.
43. Mr. Burge's testimony concerning declinable and protective percentages of
reports appears to be directly contradicted by an RCC publication entitled "Objec-
tives 1970," indicating that RCC does in fact use a quota system. This booklet
compares the local offices' latest figures in each category with the main office's
formulated goals. See Foer, supra note 42.
44. "Declinable" means that the risk is high.enough that the underwriter should
decline to insure or should set the premiums at a very high rate.
include heavy drinkers, sexual deviates, children out of wedlock,

those considered promiscuous, those who live with unmarried indi-
viduals, and a host of other categories which may have no bearing
on the risk the investigatee presents for a particular policy. 5 The
reader should keep in mind that despite the fact that insurance is
being discussed at this time, these facts apply to most of the other
services RCC offers its clients.
B. Training the Investigators

1. Investigatory ethics
Before examining the training procedure for new investigators, it
would be of some interest to look at the governing constitution of
another credit data corporation which has attempted to proscribe
some of the traditionally deplorable behavior of credit investigators.
One might view this as a "Canon of Ethics" by which to investigate:
In performing this role [as a credit reporting agency] TRW Credit
Data has recognized its obligation to support and implement policies
which will insure fairness and respect for the Consumer's right to
privacy. Since its formation in 1960, TRW Credit Data has adopted
three important operating principles: the right of the consumer to
inspect his files; collection of only relevant factual information; and
the premise that information gathered for one purpose shall not be
used for any other purpose. The United States Congress, in 1971,
recognized those principles, in legislation entitled the Fair Credit
Reporting Act. TRW Credit Data fully endorses this act."
The TRW Constitution describes a mode of behavior that, if faith-
fully observed, would give the credit reporting industry a far better
reputation than it now enjoys. Observance of these standards would
eliminate the situation in which one firm will advertise to its clients
that it can provide not only the necessary financial data, but prying
narrative evaluations of people's lifestyles that its competitors do
not. This creates a kind of "competition" among the credit reporting
agencies, virtually forcing legitimate reporting agencies to engage in
less than ethical conduct. 47 This code of conduct and the factors
45. RCC publishes a manual designed to outline the protective and declinable
areas and how to investigate and develop such cases. This manual, entitled "Handy
Guide," details the areas that are considered to be protective or declinable and
what to look for under each category.
47. Id. at 63-64. The credit bureaus refer to this process as the need to develop
affecting its observance should be kept in mind during the following

analysis of RCC's training procedures. The new investigator will be
followed from the first day on the job, through the indoctrination
period, and finally to his handling of a credit report on his own.
2. Out in the field
RCC draws its employees from all walks of life. Many of its inves-
tigators are students looking for part-time work, while a larger por-
tion of them are so-called professional investigators. Some of the
professionals have worked for the firm for ten or twenty years, and
their entire source of income is the RCC paycheck. Generally, the
part-time investigators are less assiduous in pursuing their investi-
gations. They do not gather adverse information or meet the strict
production criteria which have been set out for the professional.
This is probably because the professional must make some sort of
record with his supervisors and office managers to obtain raises,
promotions, and, simply, to stay on the payroll.
The training supervisor is responsible for taking the new investi-
gator into the field to "show him the ropes." Generally this indoctri-
nation begins with the use of the various forms. The new investiga-
tor is shown that there are forms to cover virtually every type of
credit report. There are also noteforms for each of those final forms.
After the supervisor explains the use of the noteforms and final
forms, he describes how a case is logged. RCC's form 930 is used to
list the names of each of the investigatees for that day, and to
indicate the percentages of "protectives" and "declinables." Thus,
form 930 reflects more than any other document the investigative
pattern of RCC, and the fact that RCC does have a quota system
for declinables and protectives. 8 After the new investigator has re-
ceived his load of cases for that day, he is instructed to make out a
form 930 for himself and one for the supervisor. A good training
supervisor will sit down with the new investigator for a few minutes
prior to going into the field and explain to him how he can use a
more information. Insurance companies will often contract with the credit bureaus
which can provide the greatest amount of declinable information. See Hearings on
Amending the FCRA, supra note 2, at 18.
48. Hearingson S. 2360, supranote 1, at 839, 845, 856, 865, 869. The current form
930 is also illustrative of the number of cases with which an investigator may be
expected to deal in the course of a day. The form, which is used to list the names
of each of the investigatees for a given day, provides the investigator with sufficient
space to list up to 22 individual investigatees. A copy of form 930 is on file in the
office of the American University Law Review.
roadmap to "plot" the cases. The new investigator must be made

to realize that the timing situation is bad enough, and, if one does
not plot his cases in some sort of geographical order, there is no
chance of completing them before the end of the day.
RCC's investigatory methodology is known as "one and one."
This indicates to the new investigator that he must have at least two
sources for each investigation, one of which may be the investigatee
himself and one of which must be an outside source. This suggests
that the investigator is expected to approach each investigatee's
house first. If the investigator is fortunate, the investigatee will be
at home, or a member of his family will be there and able to answer
the questions. The investigator should be honest and explain to the
investigatee that he is from RCC and what his job is. However, this
direct approach runs the risk that it will upset the investigatee to
such a degree that the investigator will get no cooperation in com-
pleting his case.49 Consequently, the investigator may be likely to
say that he represents the insurance company in a follow-up inter-
view at the agent's request. This technique is called the "indirect
approach" by RCC staffers,5" and does not seem to bother the inves-
tigatee to the same degree as an approach by an independent inves-
tigating company.
Continuing to follow the legitimate investigation, the next task of
the novice will be to contact at least one outside source. He will
probably take the easiest route and talk to the lady or man of the
neighboring house. This is often unsuccessful, however. Many
neighbors resent prying behavior and will not discuss one another.
Assuming for the moment that a neighbor is at home and the inves-
tigator represents himself as a member of the RCC staff following
up on an insurance investigation, he may be met with one of two
responses. The undesirable response is, "I won't discuss my neigh-
bor." On the other hand, a local gossip is most helpful as a source
of information for the investigator, disregarding, of course, the unre-
liability of that information.
If the neighbor is home and willing to respond to the questions,
the investigator has completed his case, However, many cases, if not
a majority, are hindered because neither the investigatee nor the
neighbors are at home. If no one is home at the investigatee's house,
49. In the experience of one of the authors of this comment, many investigatees
became very upset when they learned the nature of the investigation, who was
performing it, and why. See Hearingson Amending the FCRA, supranote 2, at 25.
50. See Foer, supra note 42.
no neighbors are contacted and no former employers are available

for comment, the investigator is then in a predicament. He has but
one hope left. The investigator is told from his first day on the job
that it is very important that his work product be returned the same
day it is handed out. This means that if unable to contact sources
on a particular day, he can do one of two things: delay the case, that
is carry it for another day or so and take the chance of building up
an excess of cases that will get him behind on his salary and work,
or "zing" and telephone.
To "zing" the case means that the investigator will take the infor-
mation that he has developed or which has been supplied to him by
the underwriter, and record that information on the noteform and
final report. He may extemporize when he has to, expanding on
what little he has available. Of some consolation to the consumer
is the fact that investigators do not zing adverse information. The
potential risk of discovery in doing so is something no investigator
wishes to accept.'
The alternative to "zinging" a case is telephoning'it. To telephone
a case the investigator simply calls the consumer and asks for the
information needed to fill out his report. This is discouraged for
obvious reasons, among the most important of which is having to
take the consumer's word for his state of health, bad habits, and so
forth.
After he has completed all his noteforms, the new investigator will
go home or to the office, and pick up a dictaphone to complete the
reports. On the noteform he will write any information that the
secretary will need and that cannot be dictated. He will then pro-
ceed to dictate any gathered information regarding the investiga-
tee's family habits, sex habits, and other personal information
which comprises the narrative section of most RCC form reports.
51. A blatant example illustrating the insufficiency of this investigative tech-
nique is the case referred to as that of the "zinged paraplegic." This case involved
a credit report (including the status of the subject's health) sought by an insurance
company on an individual who had applied for an insurance policy. Instead of
properly investigating the case himself, the investigator merely "zinged" the insur-
ance applicant's credit report. Unknown to the investigator, however, was the fact
that the applicant was a paraplegic. The insurance company which had initially
requested the credit report had additional information regarding the applicant
which it had not supplied to the bureau. Shortly after submitting its credit report
to the insurance company, the credit bureau "received notice from the insurance
company that it should reopen the case, for obviously there had been some error
in declaring that the [applicant] was in perfect health." Hearings on Amending
the FCRA, supra note 2, at 9.
This process takes several hours, depending on the volume of reports

the investigator has carried that day. Next, it is his responsibility
to work out his total case load for the day on form 930.
To continue the procedural analysis so that one can take into
account the actual practices of RCC, the strict time schedule on
which investigators are placed must be understood. The part-time
investigator is given twelve to twenty cases daily, which must be
completed in four hours. 52 The full-timer is expected to complete at
least sixteen and preferably twenty to twenty-five cases daily. RCC
claims in its time study analysis that it takes 22 minutes to com-
plete a report.5 3 This would be believable were there no traffic prob-
lems, and if all the investigatees were within a square mile radius
of one another. However, this is rarely the case. What the part-timer
or full-timer is expected to do is complete a tremendous volume of
cases in a short period of time. He quickly realizes that this is all
but impossible.
The reality of this time schedule should also be considered in light
of the contract between RCC and its underwriting clients." That
contract tells the underwriter that RCC uses the "one and one"
method described earlier. This is the system by which they expect
their cases to be evaluated and completed. They agree that RCC
must go to the home of the insured and examine the individual and
his environment. Thus, RCC clients expect the investigator to speak
with the insured, his neighbors, and employers, and to gather relia-
ble first-hand information. What they do not know is that the inves-
tigator is given so many cases daily that it is virtually impossible
for him to complete them by the specified method. It must be em-
phasized that RCC tells its clients that investigations take no more
than four days to complete. This policy is explained in detail to each
investigator, while stress is placed on returning the case the same
day. Thus, tremendous pressure is placed upon the investigator to
"shortcut" the case when he cannot quickly contact his sources.
Throughout the investigations into the credit reporting industry,
many individuals have questioned why and how RCC has been per-
52. See id. at 8 (statement of Mark S. Brodie).

53. This information was provided by Messrs. Keating and Schaeffer at the
meeting cited in note 35 supra.
54. Information regarding the contents of those contracts was provided by
Messrs. Keating and Schaeffer. See note 35 supra. These gentlemen are the pro-
curers of RCC contracts for the Mid-Atlantic region and the metropolitan Washing-
ton, D.C., area. Apparently RCC's claimed methods of pursuing an investigation
would become part of the contract.
mitted to perform its contracts in this fashion. And, of course, the

parallel issue is why RCC has not stopped its investigators from
utilizing these unethical methods. One apparent answer is that RCC
cannot afford to change its methodology. The average report costs
RCC $5.60 to produce. At that price it becomes very clear why the
company cannot do an adequate investigation in every case. Com-
panies in the industry depend on volume and fast service to keep
their competitors from outselling them. Thus, of necessity, RCC has
placed a burden upon its own staff members which makes it more
difficult for them to follow the prescribed course of conduct. As for
the insurance firms, it has been suggested that the reason they do
not complain of this behavior is that they do not know what is going
on, or that they are willing to allow it for their less important clients
so they may utilize the full services of RCC on the larger ones.
C. RCC's Response
Throughout the past decade, the credit reporting industry has
been carefully scrutinized. As a result of the many charges that have
been made during that period, RCC has developed a standard re-
sponse. It comes in the form of a summary of the multiple state-
ments that W. Lee Burge, president of the company, has made at
many of the hearings on industry practices.
There is unanimous agreement that business information systems are
a necessary part of a mobile society in which consumers move freely
from place to place. Daily and quickly, business reporting firms are
able to verify and report the integrity and trustworthiness of an over-
whelming majority of consumers. As a result, consumers are readily
extended credit, insurance and offers of employment. We take pride
in performing this service for the customer and the businessman. 5
This is the rationale for the existence of RCC. RCC does realize,
however, that there are serious charges being made about its busi-
ness practices. In fact, it is doubtful that RCC would have expended
the time to appear before the various committees that have probed
industry operations unless it believed that adverse publicity would
lessen profit-producing capabilities. Naturally, the industry is
afraid, and legitimately so, that stringent federal regulations could
emerge from congressional investigatory committees. Burge seems
to believe that the greatest fear of the American consumer is that
RCC and other companies
amass large collections of material containing the most infinite kinds
55. Hearingson S. 2360, supra note 1, at 57 (statement of W. Lee Burge).
of information about individuals, assemble this information into

what are loosely referred to as dossiers, and then freely provide such
information to anyone who has the purchase price. 8
RCC categorically denies that the corporation does any of this. As
it has explained many times, its job is a simple one. The firm re-
ceives requests from its customers to verify information that is not
obtainable through the routine insurance application, but RCC as-
serts that it strives to select out legitimate facts about an investiga-
tee from the unfounded or fabricated.
RCC states that yet another of the misconceptions concerning its
firm is that most people object to an investigation when they learn
about it. One of the authors of this comment, while gaining experi-
ence as an RCC investigator, found that an overwhelming majority
of the people to whom investigators speak and with whom they are
honest object to the fact that they are being investigated pursuant
to a credit or insurance application. Most of the investigatees state
that they were not informed that this would be one of the prerequis-
ites for obtaining insurance. Naturally, they do not believe that the
invasion of privacy is warranted. In contrast Burge has stated:
Our long history of acceptance by the American public clearly indi-
cates the ready acknowledgement by the consumer of the neces-
sity-in fact, the desireability-of investigating before key decisions
are made.57
If most of RCC's reports are, in fact, unreliable, then the insur-
ance industry appears not to be relying upon the completion of all
investigations by RCC, but upon the law of averages. Risk factors
thus seem to be spread throughout the insurance industry by chance
and not design. RCC seems to feel that, because it has so many
direct interviews daily with the public, it would have been ap-
praised of its unpopularity long before now. What the company
neglects in its analysis is the fact that the way the system is handled
creates a situation in which it is not contacting thousands of people
daily. Further, were it doing so, most people would not know who
they were being contacted by because of widespread use of the so-
called indirect method.
RCC also tries to utilize the statistics on the small number of
investigatee requests for an explanation of their consumer reports
under the Fair Credit Reporting Act (FCRA) to show that most
56. Id. at 57. With regard to the individual's fear of dissemination of personal
facts affecting his privacy see ProtectingPrivacy, supra note 19.
57. Hearings on S. 2360, supra note 1, at 58 (statement of W. Lee Burge).
people are not upset by the present system. 8 The industry has over-
looked the fact that a majority of those on which adverse reports are
obtained are simply not cognizant of their rights under the FCRA.
That Act could probably have been a more effective piece of legisla-
tion had the American consumer been made more aware of both the
reasons for passage of the bill and the specific contents of the Act
itself.
1-. THE FAIR CREDIT REPORTING AcT

In passing the FCRA, Congress evidenced its sensitivity to the
conditions imposed on the consumer by the credit reporting indus-
try. However, concessions were made in the Act which severely limit
its effectiveness in vindicating the individual's right to "informa-
tional" privacy. 9
[O]ne of the purposes of the Fair Credit Reporting Act was to safe-
guard the individual's right to reasonable privacy. . . . Rather than
regulate the type of information that could be collected, Congress
thought the consumer could be best protected if the nature and the
scope of the investigation would be disclosed in advance so the con-
sumer would know what was being asked about him.
The consumer could then make his own decisions as to whether he
would be willing to surrender some of his privacy in return for a
benefit for which he has applied .... 10
These are highly laudable purposes, but somehow they were not
reflected in the FCRA as finally passed by Congress.'
58. Id. at 59, where Burge states:

Of even more importance, from the many thousands of interviews we hold
each day, we are convinced that consumers are fully informed about, and
accept the fact of an investigation. The Notice provided by Section 615(a)
has also been effective in directing consumers to us. After dealing with
hundreds of thousands of consumers, we are also convinced that the act's
detailed requirements and procedures enable consumers freely to correct any
errors that have occurred without jeopardizing the free flow of business infor-
mation.
59. It is clear from the provisions of the FCRA itself that a primary objective of
this Act is to safeguard the consumer's right to privacy.
There is a need to insure that consumer reporting agencies exercise their
grave responsibilities with fairness, impartiality, and a respect for the con-
sumer's right to privacy.
15 U.S.C. § 1681(a)(4) (1970).
60. Hearings on S. 2360, supra note 1, at 283-84 (statement of Senator Prox-
mire).
61. The FCRA provides for disclosure (to the consumer) of the request for an
investigative consumer report not later than three days after the date of the re-
The credit reporting agencies succeeded in selling Congress the

monstrous proposition that they should remain free to collect and
disseminate erroneous dossiers-subject only to liability for malice or
willful intent to injure-and that the burden2 should fall upon their
subjects to come forward and correct errors.
In addition, the FCRA authorizes investigators to gather "informa-
tion as to [a consumer's] character, general reputation, personal
characteristics, and mode of living. 6 3 Thus, it is not surprising to
find that credit reports often contain information that is either irrel-
evant or obsolete or both. In fact, the Federal Trade Commission
has stated in an advisory opinion that there is no restriction as to
relevancy in the FCRA.1' Information regarding a person's private
life, such as racial or ethnic descent, domestic trouble, housekeeping
habits, or the condition of one's yard, although within the scope of
sections 1781a(d) and (e) of the FCRA, is irrelevant for purposes of
deciding credit worthiness or suitability for employment.
Two major problems exist with the FCRA, in addition to the fact
quest. 15 U.S.C. § 1681(a)(1) (1970). Thus, it is conceivable that an investigative

consumer report could be requested, made, and in the hands of the user before the
subject ever learns of the request. The consumer is therefore deprived of any oppor-
tunity to balance the disadvantages in terms of lost privacy versus the advantages
of acquiring the benefit. Furthermore, the consumer never learns of the actual
contents of his "file," but only the "nature and substance" of the information in
the report. 15 U.S.C. § 1681g(a)(1) (1970).
62. Countryman, supra note 8, at 847.
63. 15 U.S.C. §§ 1681a(d), (e)(1970). Regarding the breadth of information
which may be gathered and recorded pursuant to the FCRA, Mr. John H. F.
Shattuck, Staff Counsel, American Civil Liberties Union, has framed the issue
well:
The most controversial question with respect to the regulation of credit
reporting continues to be whether certain types of information simply should
not be collected at all. Credit reporting companies have so far successfully
argued that it is impossible to define what information is clearly "irrelevant"
to a person's credit, insurance or employment rating. Neither the FCRA nor
S. 2360 (the proposed amendments to the FCRA) contain any limitationson
what may be collected and recorded, although the FCRA prohibits the re-
porting (but does not require the expungement) of certain "obsolete" infor-
mation more than seven years old.
Hearingson S. 2360, supra note 1, at 641 (emphasis added).
64. See 4 CCH CONSUMER CREDrr GUIDE 11,313 (1971).
It [the FCRA] does not limit the kind of information that can be gathered,
nor requires the reporting of 'relevant' information, and it does not give
consumers the right to possess physically their file or to receive a copy of it.
that all actions for invasion of privacy are effectively barred. 5 The
first is the lack of a requirement that credit bureaus fully disclose
the contents of consumers' credit files to them." The second is the
65. The Act provides that
no consumer may bring any action or proceeding in the nature of. .. inva-
sion of privacy ... with respect to the reporting of information against any
consumer reporting agency. . . except as to false information furnished with
malice or willful intent to injure such consumer.
15 U.S.C. § 1681h(e) (1970).
That this section is clearly a non-remedy is well illustrated by the following pas-
sages from Countryman, supra note 8:
If the subject resorts to an action for invasion of privacy, he confronts the
traditional assertion that the right to privacy proscribes only publicizing
private matters. Even if he persuades a court that the concept has developed
to protect against all offensive intrusions into private affairs, the court may
respond that this right is qualified by the 'legitimate' interest of the user of
the files.
The credit reporting agencies succeeded in selling Congress the monstrous

proposition that they should remain free to collect and disseminate erroneous
dossiers-subject only to liability for malice or wilful intent to injure-and
that the burden should fall upon their subjects to come forward and correct
errors.
Id. at 844-45, 865 (footnotes omitted).
The burden of establishing malice or willful intent to injure is made even more
difficult to overcome by the fact that consumers have no direct physical or visual
access to their credit files. See note 66 infra. See also 15 U.S.C. § 1681g(a)(1)
(1970). It should be noted that if the proposed amendments to the FCRA are
passed, this problem would in large measure be alleviated since the present bar
[section 1681h(e)] to privacy suits would be eliminated. See Hearings on S. 2360,
supra note 1, at 3-9.
66. As Lewis A. Engman, Chairman of the Federal Trade Commission, stated:
The most complained of feature of the FCRA is the disclosure (or lack
thereof) by the consumer reporting agency ....
Since the consumer does not have the right to examine his own file or receive
a copy of the information, he is unable to question the completeness of the
disclosure . ...
The current procedure of having a "trained interviewer" read the file does
not sufficiently fulfill the consumer's legitimate and fundamental right to
know. In our view, by any reasonable standard of fairness, the consumer has
a right to know exactly what information is being collected and sold about
him. . . . In a country where privacy is a right and due process is considered
fundamental, the subject of a credit, insurance, or employment investigation
cannot reasonably be expected to protect himself unless he has the capability
to learn who is saying what about him.
Hearingson S. 2360, supra note 1, at 658-60.
complete absence of any attempt to restrict the collection and dis-

semination of private information that is irrelevant or only margin-
ally relevant to business decisions.
The first problem arises under sections 1681d"7 and 1681g"8 of the
FCRA, which attempt to provide for disclosure to consumers of
information contained in their credit reports. Section 1681d requires
that the user, i.e., the party requesting the report, disclose to its
customer, the consumer, within three days after the user requests
the report, that it "may be made." In addition, the user, after re-
ceiving a request for disclosure from the consumer, must make
known the nature and scope of the investigation requested. Section
1681g(a) provides that upon request, the credit bureau shall disclose
the "nature and substance of all information. . . in its files on the
consumer at the time of the request." It should be emphasized that
nowhere is the consumer permitted to see the file with his or her
own eyes. "The entire procedure, from the user's disclosure to the
correction of erroneous information and renotification has proved to
be ineffective." 69
A direct result of the consumers' not being entitled to visually
inspect or physically handle their credit files is that in the highly
sensitive realm of investigative reporting, where personal informa-
tion abounds, the consumer may never learn the full content of the
file.70 The Federal Trade Commission undertook a study to deter-
mine whether the disclosure and reinvestigation" provisions of the
Act were working. It was found that
there is often wholesale withholding of information concerning char-
acter, reputation, or morals. Since the consumer does not have the
right to examine his own file or receive a copy of the information,
2
he
is unable to question the completeness of the disclosure.
67. 15 U.S.C. § 1681d (1970). This section is entitled "Disclosure of Investigative

Consumer Reports."
68. 15 U.S.C. § 1681g (1970). This section is entitled "Disclosure to Consumers."
70. Id. at 658.
71. 15 U.S.C. § 1681i (1970). This section sets forth the procedure to be followed
in the event that a consumer challenges the accuracy of his credit report. Upon
communication of any dispute as to the accuracy of the credit report by the con-
sumer to the credit reporting agency, the agency "shall within a reasonable period
of time reinvestigate and record the current status of that information unless it has
reasonable grounds to believe that the dispute by the consumer is frivolous or
irrelevant." Id.
72. Hearings on S.2360, supra note 1, at 659.
The failure of the FCRA to provide for adequate disclosure to the

consumer of the information contained in his or her file hardly
seems to square with the principles of procedural due process estab-
lished by the Supreme Court.7 3 This becomes particularly apparent
when it is recognized that a consumer may be denied a job, credit,
or insurance on the basis of information contained in consumer and
investigative consumer reports. Indeed, in the situation where a
consumer is being considered for a promotion or job for which he has
not specifically applied, the prospective promoter or employer may
procure an investigative report on the consumer and never disclose
the fact. 74 Thus, the question of whether the credit bureau's disclo-
sure to the consumer of the contents of his or her file was adequate
is never reached. Under these circumstances, the consumer may be
denied a promotion or job on the basis of information which the
consumer has had no opportunity to confront and about which he
or she has no knowledge.
In terms of procedural due process, the Supreme Court has held
that a federal government employee who is in danger of losing his
job because the employer has received adverse information about
him must be presented with the information and given an opportun-
ity to rebut it. 75 Similarly, welfare recipients who face termination
of benefits must be provided with a pretermination evidentiary
hearing in order to comply with procedural due process." A some-
what different government recordkeeping practice confronted the
Supreme Court in Wisconsin v. Constantineau, 77 where it was
stated:
Where a person's good name, reputation, honor, or integrity is at
stake because of what the government is doing to him, notice and an
opportunity to be heard are essential. . . Only when the whole
proceedings leading to the pinning of an unsavory
78
label on a person
are aired can oppressive results be prevented.
73. See notes 75-78 infra. See also text accompanying notes 142-260 infra for
a discussion of state action as it relates to the operations of commercial credit
bureaus.
74. 15 U.S.C. § 1681d(a)(2) (1970).
75. Greene v. McElroy, 360 U.S. 474 (1959). See also Gayer v. Schlesinger, 490
F.2d 740 (D.C. Cir. 1973); Sands v. Wainwright, 357 F. Supp. 1062 (M.D. Fla.
1973); Anaconda Co. v. Ruckelshaus, 352 F. Supp. 697 (D. Colo. 1972).
76. Goldberg v. Kelly, 397 U.S. 254 (1970).
77. 400 U. S. 433 (1971).
78. Id. at 437. In Constantineau,the Supreme Court declared unconstitutional
a state statute which authorized certain officials to post in retail liquor outlets the
names of individuals who, as a result of excessive drinking, exhibited certain condi-
On the basis of these precedents, serious constitutional questions

are presented as to whether the FCRA satisfies procedural due pro-
cess standards regarding its provisions for notifying consumers that
they are about to be investigated and informing them of the results
once they are included in the credit files.79
The second major drawback of the FCRA approach is that it
places no restrictions on the kinds of information which commercial
credit bureaus may gather and disseminate. The Act fails to strike
any real balance between the need for personal, highly sensitive
information and the individual, and the societal interest in main-
taining some standards of privacy regarding one's personal life.
Presently, information totally irrelevant to any "legitimate business
need" may be included in credit or investigative reports regardless
of the individual's interest in privacy." Similarly, information
which is highly relevant to a single user but of only marginal rele-
vance to many others can be included in reports to all users. Conse-
quently, not only does the FCRA fail to adequately protect a con-
sumer's constitutional right to informational privacy, but it leaves
the consumer whose privacy has been invaded without meaningful
legal redress."
I1. THE FUNDAMENTAL RIGHT TO INFORMATIONAL PRIVACY

A. Introduction
Before discussing constitutional privacy and state action, it might
be well to set out the reasons why this course was chosen instead of
traditional common law or legislative remedies. Individuals who are
fortunate enough to be aware of the fact that a denial of credit,
insurance, or employment may be caused by an adverse credit re-
port from a commercial credit bureau, and who believe the credit
report is erroneous, usually bring libel actions against the credit
bureaus. They have traditionally been unsuccessful." The reason for
tions or traits. Since the posting was done without prior notice to the individual
involved and without any opportunity for this individual to be heard before the
fact, the Court held that this statute failed to meet the requirements of procedural
due process.
79. For a discussion of other serious inadequacies in the notice requirements of
the FCRA see Note, The Fair Credit ReportingAct, 56 MINN. L. REv. 819, 829-30
(1972).
80. See Protecting Privacy, supra note 19, at 562-63.
81. Id. at 557-60. For a detailed analysis of five provisions of the FCRA which
are directed primarily at protecting the consumer's privacy see id. at 557-61.
82. See, e.g., Peller v. Retail Credit Co., 359 F. Supp. 1235 (N.D. Ga. 1973);
this unfortunate result is that credit reporting agencies are accorded

a qualified privilege s3 on the theory that they are serving a legiti-
mate business need. This renders common law remedies generally
unavailable to the victims of false, misleading, and inaccurate
credit reporting practices, unless the victim can meet the burden of
proving malice on the part of the credit bureau." Secondly, it seems
that courts, the traditional guardians of individual liberties, would
be better able and more inclined to preserve the right to informa-
tional privacy implicit in the Constitution than would a legislature
which is highly sensitive to such powerful influences as the billion-
dollar credit reporting industry. The result of this influence is best
reflected in the following testimony by Mr. John H. F. Shattuck
before Senator Proxmire's Subcommittee on Consumer Credit:
It is difficult not to conclude that the FCRA as it is currently
drafted is an invitation to snoop into virtually every aspect of a per-
son's life. Investigators are authorized under §1681(a) (1) [sic] to
gather "information as to [a consumer's] character, general reputa-
tion, personal characteristics, and mode of living." Under that lan-
guage the sky is the limit.8
The sky is indeed the limit, as illustrated by the decision of the
United States District Court for the Northern District of Georgia in
Peller v. Retail Credit Corporation."8 In Peller,
the plaintiff brought
an action for alleged violations of the FCRA and for violation of his
right to privacy. At the request of one prospective employer, the
plaintiff voluntarily submitted to a polygraph examination. Shortly
Wilson v. Retail Credit Co., 325 F. Supp. 460 (S.D. Miss. 1971); Peacock v. Retail
Credit Co., 302 F. Supp. 418 (N.D. Ga. 1969), aff'd, 429 F.2d 31 (5th Cir. 1970).
See also Credit and the Right to Privacy, supra note 29, at 513-14.
83. See, e.g., Wetherly v. Retail Credit Co., 235 Md. 237, 201 A.2d 344 (1964);
Shore v. Retailers Commercial Agency, 342 Mass. 515, 174 N.E.2d 376 (1961);
Barker v. Retail Credit Co., 8 Wis. 2d 664, 100 N.W.2d 391 (1960); A. WESTIN,
PRIVACY AND FREEDOM 347-49 (1967) [hereinafter cited as WES N].
84. See generally Countryman, supranote 8, at 844; McNamara, The FairCredit
Reporting Act: A Legislative Overview, 22 J. PuB. LAw 67, 69-70 (1973)
[hereinafter cited as McNamara]. For an excellent analysis of the broad condi-
tional or qualified privilege accorded to commercial credit bureaus and the cases
decided in that area see Credit and the Right to Privacy, supranote 29, at 513-18.
85. Hearings on S. 2360, supra note 1, at 641. In subsequent hearings before
Senator Proxmire's Subcommittee on Consumer Credit, the consensus of the wit-
nesses (all of whom were former Retail Credit Company investigators) was that the
Fair Credit Reporting Act has not changed the tactics used by investigators "one
IOTA" nor has it "increased the competency of the (credit) reports." Hearings On
Amending the FCRA, supra note 2, at 28-29.
86. 359 F. Supp. 1235 (N.D. Ga. 1973).
thereafter, an agent of the employer informed the plaintiff "that he

had not passed the polygraph examination and would not be
hired."87 The plaintiff then secured employment with a new em-
ployer who subsequently discharged him on the basis of adverse
information contained in his file with Retail Credit Company. In
fact, the results of the polygraph examination which the plaintiff
had originally failed had somehow found their way into RCC's file.
The "adverse" information responsible for the termination of the
plaintiff's employment was the fact that the polygraph results re-
vealed that he had used marijuana in the past.'
The Peller court, in dealing with the plaintiff's FCRA claims,
construed sections 1681a(f) and 1681a(d)89 narrowly, and held that
neither the employer who had asked the plaintiff to submit to the
polygraph examination or the company which administered the ex-
amination was a "consumer reporting agency" within the FCRA.
Thus, the polygraph information given to its clients by the company
which administered the examination did not constitute a "con-
87. Id. at 1236.

88. Id.
89. The FCRA defines a "consumer reporting agency" as
any person which, for monetary fees, dues, or on a cooperative nonprofit
basis, regularly engages in whole or in part in the process of assembling or
evaluating consumer credit information or other information on consumers
for the purpose of furnishing consumer reports to third parties, and which
uses any means or facility of interstate commerce for the purpose of preparing
or furnishing consumer reports.
15 U.S.C. § 1681a(f) (1970).
"Consumer report" is defined as
any written, oral, or other communication of any information by a consumer
reporting agency bearing on a consumer's credit worthiness. . . character,
general reputation, personal characteristics, or mode of living which is used
• . . as a factor in establishing the consumer's eligibility for ... employ-
ment .... The term does not include (A) any report containing information
solely as to transactions or experiences between a consumer and the person
making the report ....
15 U.S.C. § 1681a(d) (1970).
In his statement before Senator Proxmire's Subcommittee on Consumer Credit,
Lewis A. Engman, Chairman of the Federal Trade Commission, observed:
Application of the protections afforded by the FCRA depends entirely
upon the triggering term 'consumer reporting agency.' That is, unless the
'person' collecting or reporting information comes within the narrow frame-
work of that definition, the information furnished by that person cannot be
construed as a 'consumer report' and none of the requirements or concomi-
tant benefits of the Act apply.
Hearings on S. 2360, supra note 1, at 662 (emphasis added).
sumer report" within the scope of the FCRA. Consequently, by

strictly construing the FCRA's already narrow definitions of "con-
sumer reporting agency" and "consumer report," the Pelter court
was able to avoid finding what should have been a clear violation
of the FCRA. In addition, the court summarily dismissed the plain-
tiff's privacy claim on the ground that he had failed to allege malice
or willful intent." Although the decision is unclear as to whether the
plaintiff alleged a violation of his constituti6nal or common law
right to privacy, what is clear is that the Peller court made no effort
to consider the plaintiff's constitutional right to privacy which, on
the facts before it, would clearly seem to have been violated.
The efficacy of the FCRA in protecting the consumer's right to
informational privacy has been less than overwhelming. Indeed, the
testimony of Lewis A. Engman, Chairman of the Federal Trade
Commission, provides a cogent summary regarding the inability of
the FCRA to provide any remedy to the consumer whose rights have
been violated by commercial credit bureaus:
The type of civil action currently allowed under the FCRA
gives consumer reporting agencies no real incentive to prevent or
reduce inaccuracies, since the amount of monetary damages suffered
by the consumer is generally very small, and it is seldom worthwhile
for the consumer to bring suit ....
[Tihe present civil liability sections of the Act. .. do not appear
to provide an adequate deterrent to noncompliance. The chances of
recovery . . are . . so insignificant that private legal redress to
date is virtually nonexistent."
Judicial recognition of a constitutional right to informationalpri-
vacy would not preclude legislation similar to the FCRA. It would,
however, permit the courts to adequately preserve this essential
civil liberty and provide the groundwork upon which precise, well-
tailored legislation and administrative regulations could be estab-
lished.
B. The Right to Privacy

Informational privacy is but one of several aspects of the right to
privacy which courts are beginning to recognize as constitutionally
required. The right to privacy has been developed both procedurally
and substantively around the first, third, fourth, fifth, ninth, and
fourteenth amendments. To date, this right has not been used to
90. 359 F. Supp. at 1237.

91. Hearingson S. 2360, supra note 1, at 668.
combat business practices which cause invasions of privacy because

the courts have been unwilling to extend this right to include abu-
sive, "private" recordkeeping practices." The Supreme Court has,
however, recognized a first amendment right not to be required to
disclose political or associational information to government inves-
tigators. The penumbra of the first amendment, in which privacy
is protected from government intrusion has also been recognized by
the Supreme Court as guaranteeing the "freedom to associate and
93 The government is also prohibited
privacy in one's association.
from obtaining information from a third party, such as a person's
bank, unless the person consents to give the information after hav-
ing been notified of the request. 4
In San Antonio School District v. Rodriguez,"9 The Supreme
Court established the test for determining whether a right is funda-
92. Hearingson S. 2360, supra note 1, at 638 (statement of John Shattuck). The
traditional argument advanced here is that since "private" organizations are not
subject to constitutional restraints, courts are without power to find that the prac-
tices of these organizations violate the constitutional right to privacy. Of course,
this would not be the case were the court to find that the activities of the "private"
organization had become so "impregnated with a governmental character as to
become subject to the constitutional limitation on state action." Evans v. Newton,
382 U.S. 296, 299 (1966).
93. NAACP v. Alabama, 357 U.S. 449, 462 (1958).
94. Hearings on S. 2360, supra note 1, at 638, citing Pollard v. Roberts, 283 F.
Supp. 248 (E.D. Ark.), aff'd per curiam, 393 U.S. 14 (1968). In Pollardthe district
court held that to compel disclosure of the identities of political party contributors
and the amounts of their contributions pursuant to a subpoena duces tecum ob-
tained by the prosecuting attorney in his investigation of alleged vote buying would
violate the first and fourteenth amendment privacy interests of the party and its
contributors. This case represents a clear example of a federal court recognizing
and protecting an individual's constitutional right to informational privacy. Citing
cases such as Louisiana ex rel. Gremillon v. NAACP, 366 U.S. 293 (1961), and
Shelton v. Tucker, 364 U.S. 479 (1960), for the proposition that the government
may not violate an individual's rights of association and privacy guaranteed by the
first and fourteenth amendments, the Pollard court went on to state:
The rationale of those decisions is that the First and Fourteenth Amend-
ments protect the rights of people to associate together to advocate and
promote legitimate, albeit controversial, political, social, or economic action;
that when the objective of the group or the group itself is unpopular . ..
revelation of the identities of those who have joined themselves together or
have affiliated with the group may provoke reprisals. . . and that occurrence
or apprehension of such reprisals tends to discourage the exercise of the rights
which the Constitution protects.
283 F. Supp. at 256.
95. 411 U.S. 1, 33 (1973).
mental in the constitutional sense. Faced with the issue of whether

education was a fundamental right, the Court stated that
the answer lies in assessing whether there is a right to education
explicitly or implicitly guaranteed by the Constitution."
With respect to the right to privacy, the Supreme Court has made
it abundantly clear that this right is implicitly guaranteed by the
Constitution. For example, in Griswold v. Connecticut,"7 the Court
struck down Connecticut legislation prohibiting the use of contra-
ceptives by any person as being violative of the individual's right
to marital privacy. The Court reasoned that
specific guarantees in the Bill of Rights have penumbras, formed by
emanations from those guarantees that help give them life and sub-
stance. . . . Various guarantees create zones of privacy. . . . The
present case, then, concerns a relationship lying within the zone of
privacy created by several fundamental constitutional guarantees."
More recently, in Roe v. Wade" the Supreme Court held that
96. Id. at 33-34.

97. 381 U.S. 479 (1965). Mr. Justice Douglas, writing for the Court in Griswold,
emphasized the close relationship between the specific guarantees of the Bill of
Rights and the privacy interests violated by the Connecticut statutes in question.
Id. at 482-86. The Court stated that the right to privacy was protected by penum-
bras of the first, third, fourth, fifth, and ninth amendments as applied to the states
by the fourteenth. The first and third amendments protect one facet of the right
to privacy, that of the right of association. Id. at 484. The fourth amendment
affirms the right to privacy against unreasonable searches and seizures; the fifth
amendment gives a person a zone of privacy which the Government may not force
him to surrender to his detriment and affords protection "against all Governmental
invasions 'of the sanctity of a man's home and the privacies of life.' "Id. The ninth
amendment provides: "The enumeration in the Constitution, of certain rights,
shall not be construed to deny or disparage others retained by the people." Mr.
Justice White and Mr. Justice Harlan concurred separately in Griswold on the
ground that the law violated the due process clause of the fourteenth amendment.
Id. at 499, 502 (Harlan & White, JJ., concurring).
Perhaps the most unique approach was Justice Goldberg's detailed analysis of
the ninth amendment in his concurring opinion in Griswold. Id. at 486. Justice
Goldberg regarded the ninth amendment as signifying that the Bill of Rights was
not to be read restrictively. Rather, other rights exist which are "so rooted in the
traditions and conscience of our people as to be ranked as fundamental." Id. at 487.
These fundamental rights are preserved by the ninth amendment and then applied
as constitutional principles through the due process clauses of the fifth and four-
teenth amendments. Id. at 493. Finally, Justice Goldberg concluded that the right
to privacy was a fundamental right and could be invoked in Griswold.
98. Id. at 484-85.
99. 410 U.S. 113 (1973).
state criminal laws permitting abortions only as a life-saving proce-

dure on the mother's behalf, without regard to the stage of her
pregnancy and other interests involved, violate the due process
clause of the fourteenth amendment. The Court concluded that this
constitutional provision protects against state action infringing
upon the right to privacy. Mr. Justice Blackmun, writing for the
Court, stated:
The Constitution does not explicitly mention any right of privacy.
...the Court has recognized that a right of personal privacy, or a
guarantee of certain areas or zones of privacy, does exist under the
Constitution. '
The Court went on to state that the right of privacy is either

"founded in the Fourteenth Amendment's concept of personal lib-
erty and restrictions upon state action," or "in the Ninth Amend-
ment's reservation of rights to the people.""1 1 Thus, the right to
privacy is implicitly guaranteed by the Constitution and is therefore
02
a fundamental right.
In defining the scope of the right to privacy, the Roe Court stated:
[O]nly personal rights that can be deemed "fundamental" or "im-
plicit in the concept of ordered
03
liberty" . . . are included in this
guarantee of personal privacy.
In constitutional terms, then, the concept of informational privacy
should not be confined to unwanted publicity or palpable intru-
sions. In the context of credit reporting, the right to privacy must
be redefined in terms of the dangers posed by the formidable ability
of this quasi-public'"4 industry to accumulate and regurgitate "far-
100. Id. at 152.
101. Id. at 153.
102. Strictly private organizations performing private functions are not bound
by constitutional guarantees. See The Civil Rights Cases, 109 U.S. 3 (1883). This
comment, however, asserts in the following section that a sufficient nexus exists
between commercial credit bureaus and both federal and state governments to
trigger governmental action pursuant to the fifth and fourteenth amendments. See
text accompanying notes 142-260 infra.
103. 410 U.S. at 152.
104. In the section of this comment dealing with state action, the close relation-
ship between commercial credit bureaus and federal and state governments is set
forth. See notes 142-260 & accompanying text infra. It should be noted here,
however, that the National Commission on Consumer Finance has stated that "the
credit reporting industry has the ingredients of a public utility." Nat'l Comm'n on
Consumer Finance, Report on Consumer Credit in the United States 212-13
(1971), quoted in Hearingson S. 2360, supra note 1, at 380.
flung" data on private individuals. In light of these circumstances,

a proper definition should draw heavily on Justice Brandeis' noted
01 5
dissent in Olmstead v. United States:
They [the framers of the Constitution] sought to protect Americans
in their beliefs, their thoughts, their emotions and their sensations.
They conferred, as against the Government, the right to be let
alone-the most comprehensive of rights and the most valued by
civilized men. To protect that right, every unjustifiable intrusion by
the Government upon the privacy of the individual, whatever the
means employed, must be deemed a violation of the Fourth Amend-
ment. 0
Justice Douglas, dissenting in Warden v. Hayden,' also observed
that
[t]hose who wrote the Bill of Rights believed that every individual
needs both to communicate with others and to keep his affairs to
himself. That dual aspect of privacy means that the individual
should have the freedom to select for himself the time and circum-
stances when he will share his secrets with others and decide the
08
extent of that sharing.
Such a concept of privacy is offended by the gross compilation of
personal details, however accurately and delicately the dossier has
been compiled, and by the dissemination of those details, whether
to private or public users of the information, without the knowledge
09
1
or consent of the individual concerned.
105. 277 U.S. 438, 471 (1928) (Brandeis, J., dissenting). In Olmstead, the Su-
preme Court held that secret governmental wiretapping of a telephone conversation
conducted by the accused which involved no physical trespass on the property of
the accused did not violate the fourth amendment. This case was subsequently
overruled by Katz v. United States, 389 U.S. 347 (1967), which gave expanded
fourth amendment protection to non-consensual eavesdropping and rejected the
notion that electronic eavesdropping was permissible under the fourth amendment
unless physical invasion of a constitutionally protected area produced the chal-
lenged evidence.
106. 277 U.S. at 478 (emphasis added).
107. 387 U.S. 294 (1967). In Warden the Supreme Court announced that "the
principal object of the Fourth Amendment is the protection of privacy rather than
property" [id. at 304], and held that under the fourth amendment no distinction
exists between merely evidentiary materials, which may not be seized, and those
objects which may validly be seized, such as contraband and fruits of crime.
108. Id. at 323 (Douglas, J., dissenting).
109. Under section 1681d(a)(2) of the FCRA a person may procure an investiga.
An examination of the personal damage that may result from the

unauthorized dissemination of private information may help to
demonstrate the reasons why the right to informational privacy is
"implicit in the concept of ordered liberty." The most obvious re-
sults of dissemination of private information are embarrassment," °
emotional distress,"' and abandonment by friends or family." 2 An
equally patent form of damage arises from the fear that an individ-
ual has regarding the possibility that a credit bureau will disclose
such highly private or sensitive information as details of personal
weakness, sexual behavior, or political associations. The result is
anxiety and guarded public behavior by the individual. This clearly
appears to violate the principles established by the Supreme Court
tive consumer report on any consumer "for employment purposes for which the
consumer has not specifically applied" and nowhere is one required to disclose to
the consumer the fact that such a report was ever procured. Even under section
1681d(a)(1), which requires the person procuring the investigative consumer report
to disclose to the consumer the fact that such a report "may be made," the risk is
great that the report will have been prepared and disseminated to the person
requesting it long before the consumer is ever informed that the report was made
in the first place. This is so because one who requests a report is given three days
after the request is made to inform the consumer that a report "may be made."
The Chairman of the Federal Trade Commission, Louis A. Engman, has stated:
The user's disclosure . . . that an investigation "may be made" has proved
to be one of the most inadequate of all FCRA provisions.
Hearingson S. 2360, supra note 1, at 661.
110. Sidis v. V-R Publishing Corp., 113 F.2d 806 (2d Cir.), cert. denied, 311 U.S.
711 (1940). This case illustrates well the embarrassment and humiliation suffered
by one about whom the press had published intimate details involving his private
life.
111. According to Professor Allen F. Westin, all animals, including man, need a
kind of testimonial privacy or personal distance in order to maintain proper biologi-
cal and psychological functions. WEs~nN, supra note 83, at 8-10. Jounard suggests
that human beings very often become physically sick because of repression or
concealment of self due to a lack of respite from the social pressures around them.
Journard, Some PsychologicalAspects of Privacy, 31 LAw & CoNTEMP. PROB. 308,
309 (1966). See also Roe v. Wade, 410 U.S. 113, 153 (1973).
112. See Briscoe v. Reader's Digest Ass'n, 4 Cal. 3d 529, 483 P.2d 34, 93 Cal.
Rptr. 866 (1971). In Briscoe the Supreme Court of California held that Reader's
Digest had violated the plaintiff's right to privacy by publishing an article which
disclosed truthful but embarrassing facts about the plaintiff's private life.
The claim is not so much one of total secrecy as it is of the right to define
one's circle of intimacy. . . . Loss of control over which "face" one puts on
may result in literal loss of self identity. . . and is humiliating beneath the
gaze of those whose curiosity treats a human being as an object.
Id. at 37.
in Shelton v. Tucker 3 and NAACP v. Alabama."' In Shelton, the

Court held that an Arkansas statute which required every teacher
to file annually a list of all organizations to which he or she had
belonged or regularly contributed within the preceding five years
was invalid. This was seen as depriving the teachers of their right
of associational freedom, protected by the due process clause of the
fourteenth amendment against invasion by state action." 5 In
NAACP v. Alabama the Supreme Court recognized that a forced
disclosure of political affiliations "chills" the first amendment right
of free association, since persons feel constrained not to join contro-
versial groups if there is a possibility of subsequent economic or
social repercussions."'
Similarly, potential disclosure by credit bureau reports of one's
private behavior and social contacts may chill those constitutionally
protected aspects of one's interpersonal relations. Not infrequently,
credit reports for employment purposes also contain information
about the subject's political associations."' The spontaneous partic-
ipation in the political process that is essential to the maintenance
of democracy is thwarted by a lack of freedom to make political
choices without fear of suffering the social consequences of disap-
proval."'
C. The Need for a Right to InformationalPrivacy

The Supreme Court has long recognized that privacy is inherent
in our constitutional form of government."9 In light of the massive
113. 364 U.S. 479 (1960). Mr. Justice Stewart, writing for the Court in Shelton,
stated that
to compel a teacher to disclose his every associational tie is to impair that
teacher's right of free association, a right closely allied to freedom of speech
and a right which, like free speech, lies at the foundation of a free society.
"By limiting the power of the states to interfere with ... freedom of associa-
tion, the Fourteenth Amendment protects all persons, no matter what their
calling."
Id. at 485-86, 487 (emphasis added), quoting Wieman v. Updegraff, 344 U.S. 183,
195 (1952).
114. 357 U.S. 449 (1958).
115. 364 U.S. at 487.
116. 357 U.S. at 460-63.
117. Hearingson FairCreditReporting Before the Subcomm. on FinancialInsti-
tutions of the Senate Comm. on Banking and Currency, 91st Cong., 1st Sess.
176-77 (1969) [hereinafter cited as Hearings on FairCredit Reporting].
118. See WEsTN, supra note 83, at 24-26, 44-49.
119. See Boyd v. United States, 116 U.S. 616, 630 (1886). In Boyd the Court held
that a federal statute authorizing a court in tax cases to require taxpayers to
changes which have recently occurred in the ability to gather, re-

cord, and disseminate vast quantities of personal information, 120 and
in order to guarantee the continued existence of the individual's
"constitutional liberty and security,' ' 21 it is necessary to redefine
the constitutional right to privacy. A proper definition should en-
compass the right of individuals to determine the extent to which
another individual or group may: 1) obtain their ideas, writings, or
other indicia of their personalities; 2) obtain or reveal information
about them; and 3) intrude into their "life space."''
The United States District Court for the District of Columbia, in
Menard v. Mitchell,12 has recognized the need to redefine the right
produce private records or concede the government's allegations violated the fourth
and fifth amendments. Mr. Justice Bradley, writing for the majority, stated that
a compulsory production of the private books and papers of the owner of
goods sought to be forfeited in such a suit is compelling him to be a witness
against himself, within the meaning of the Fifth Amendment to the Constitu-
tion; and is the equivalent of a search and seizure, and an unreasonable
search and seizure, within the meaning of the Fourth Amendment .... It
may be that it is the obnoxious thing in its mildest and least repulsive form;
but illegitimate and unconstitutional practices get their first footing in that
way, namely by silent approaches and slight deviations from legal modes of
procedure. This can only be obviated by adhering to the rule that constitu-
tional provisions for the security of person and property should be liberally
construed. A close and liberal construction deprives them of half their effi-
cacy, and leads to gradual depreciation of the right, as if it consisted more
in sound than in substance. It is the duty of courts to be watchful for the
constitutional rights of the citizen, and against any stealthy encroachments
thereon.
Id. at 634-35.
See also Roe v. Wade, 410 U.S. 113, 152 (1973), citing Stanley v. Georgia, 394 U.S.
557, 564 (1969); Terry v. Ohio, 392 U.S. 1, 8-9 (1968); Katz v. United States, 389
U.S. 347, 350 (1967); Griswold v. Connecticut, 381 U.S. 479, 484-85 (1965); Olin-
stead v. United States, 277 U.S. 438, 478 (1928) (Brandeis, J., dissenting); Union
Pacific R.R. v. Botsford, 141 U.S. 250, 251 (1891).
120. See generally Mimum, supra note 11; WESTiN, supra note 83.
121. 116 U.S. at 630.
122. See Beaney, The Right to Privacy and American Law, 31 LAw & CoNTMp.
PnoB. 253, 254 (1966).
123. 328 F. Supp. 718 (D.D.C. 1971), modified, 498 F.2d 1017 (D.C. Cir. 1974).
In Menard, the plaintiff sought to compel the Attorney General and the Director
of the Federal Bureau of Investigation to expunge his "arrest" record from FBI
criminal indentification files. The district court held that where there was probable
cause for the suspect's arrest, it would not order expungement of the arrest record.
However, the court strictly limited disclosure of the arrest record to FBI employees,
federal agencies to which plaintiff applied for employment, and government law
enforcement agencies. Any further disclosure of plaintiff's arrest record, even to
prospective employers who were not federal agencies, would be enjoined. On ap-
peal, the United States Court of Appeals for the District of Columbia Circuit held
to privacy in the light of modern-day information systems. Judge

Gesell, writing for the court, stated:
The increasing complexity of our society and technological advances
which facilitate massive accumulation and ready regurgitation of far-
flung data have presented more problems in this area, certainly not
contemplated by the framers of the Constitution. These develop-
ments emphasize a pressing need to preserve and to redefine aspects
of the right to privacy to insure the basic freedoms guaranteed by this
democracy ...
Systematic recordation and dissemination of information about
individual citizens is a form of surveillance and control which may
easily inhibit freedom to speak, to work, and to move about in this
land. If information available to the government is misused to publi-
cize past incidents in the lives of its citizens the pressures for con-
formity will be irresistable. Initiative and individuality can be suffo-
cated and a resulting dullness of mind and conflict will become the
norm .... 24
For these reasons, the right to informational privacy should be re-

garded as fundamental or implicit in the concept of ordered liberty.
D. PersonalInformation as a ConstitutionallyProtectedProperty
Right
An alternative approach to bringing the right to informational
privacy within the scope of the fourteenth amendment is to consider
personal information a constitutionally protected property right.'25
Courts have traditionally given the personal information in bank
records the status of a "property right" of the depositor and have
protected it accordingly.12 One commentator on credit investiga-
that the FBI could not maintain in its criminal files plaintiff's record when plain-
tiff's encounter with the police was merely a detention and not an arrest. Although
the appeals court did not enjoin the FBI from maintaining the plaintiff's record in
its neutral non-criminal files, it did order the expungement of plaintiff's record
from the FBI's criminal files.
124. 328 F. Supp. at 725-26.
125. If personal information were to be considered a property right pro-
tected as "fundamental" under the due process clause of the fourteenth
amendment, credit and insurance investigators would probably be compelled
to notify the investigatee that an investigation is about to be commenced,
allowing him to state his objections to particular types of inquiries ... and
give him a better chance to correct or at least to note his objections to
particular items contained in the final report.
Credit and the Right to Privacy, supra note 29, at 519.
126. See Zimmerman v. Wilson, 81 F.2d 847 (3d Cir. 1936). In Zimmerman, the
government sought to compel taxpayers' bankers and brokers to submit their
tions and privacy ' has presented the interesting observation that
while cases arising under the due process clause of the fourteenth
amendment have not involved the taking of personal information,
it was also once true that courts held the fourth amendment to be
limited to searches and seizures of physical property. At one time,
efforts to extend its protection to non-physical property such as
evidence obtained by wiretapping and eavesdropping, met with fail-
ure.'2 8 In Silverman v. United States,2 ' however, the Supreme Court
extended the protection of the fourth amendment to oral statements
in light of the exteme invasions of privacy made possible by the
growing sophistication of electronic eavesdropping devices. Just as
the expansion of the fourth amendment concept of property was a
reaction to technological advances unforeseen by the drafters of the
Constitution, the steady growth in size and sophistication of compu-
terized credit and insurance investigating bureaus would seem to
1 31
justify a further expansion of property rights.
records pertaining to these taxpayers to examination by government agents. The

court held that the taxpayers were entitled to an injunction to prevent such exami-
nation on the ground that it constituted an unreasonable search. For other cases
expressing the proposition that financial matters are to be considered confidential
and that banks may not divulge them see United States v. First Nat'l Bank, 67 F.
Supp. 616 (S.D. Ala. 1946); Minohnich v. First Nat'l Bank, 224 So. 2d 759 (Fla.
App. 1969); Peterson v. Idaho First Nat'l Bank, 83 Idaho 578, 367 P.2d 284 (1961).
127. Credit and the Right to Privacy, supra note 29. See also note 69 supra.
128. See, e.g., On Lee v. United States, 343 U.S. 747 (1952).
129. 365 U.S. 505 (1961). In Silverman the trial court admitted testimony of
police officers describing "incriminating conversations engaged in by petitioners
. . . which the officers had overheard by means of electronic listening devices"
pushed through the party wall of an adjoining house. Id. at 506. The Supreme Court
held that this evidence was obtained in violation of the fourth amendment and
should not have been admitted. Writing for the majority, Justice Stewart stated:
The Fourth Amendment, and the personal rights which it secures, have a
long history. At the very core stands the right of a man to retreat into his
own home and there be free from unreasonable government intrusion.
Id. at 511.
130. See notes 10, 14, 15 supra. An alternative argument founded on due process
is that an individual who has been denied a benefit such as insurance, employment,
or credit on the basis of a credit report has been deprived of his right to confront
the evidence against him. Section 1681d(a)(2) of the FCRA states:
A person may not procure or cause to be prepared an investigative consumer
report on any consumer unless . . . the report is to be used for employment
purposes for which the consumer has not specifically applied.
15 U.S.C. § 1681d(a)(2) (1970).
Under this section, the subject of an investigative consumer report may be denied
such benefits as promotions, or other employment for which the consumer has not
The fourth amendment's prohibition against unreasonable search

and seizure also offers some protection against governmental data
collection. For example, it has been held that the government can-
not seize books and papers which do not constitute evidence of a
crime;' it cannot record and disseminate the record of an uncon-
stitutional arrest;' 2 it cannot disseminate the record of an unlawful
arrest;1u nor can the government even maintain an individual's ar-
rest record once it is informed that the police encounter was not
deemed an arrest but only a detention.'34 In Menard v. Mitchell,'35
specifically applied, on the basis of a report about which he or she is totally igno-
rant. Furthermore, under section 1681g(a)(1), the credit agency, on request, need
only disclose the "nature and substance" of the information in a consumer's credit
report file and may not be compelled to disclose the actual information itself to
the consumer. Medical information, it should be noted, is exempted from even this
narrow disclosure requirement. See § 1681g(a)(1). Thus, under the FCRA, consum-
ers can obtain absolutely none of the medical information contained in their credit
files. In Willner v. Committee on Character and Fitness, 373 U.S. 96 (1963), the
Supreme Court determined that due process requires that an applicant to the bar
be allowed to confront persons whose statements allegedly prevented him from
being accepted by his state bar association. Yet, under section 1681g(a)(2) the
sources used by the credit bureau to prepare the extremely sensitive investigative
consumer report need not be disclosed. Similarly, in Schware v. Board of Bar
Examiners, 353 U.S. 232 (1957), the Court held that the refusal by the state bar
association to allow the petitioner the opportunity to qualify for the practice of law
based on his past political associations and arrest record violated due process of
law.
131. See Stanford v. Texas, 379 U.S. 476 (1965).
132. See Wheeler v. Goodman, 306 F. Supp. 58 (W.D.N.C. 1969) (three judge
court), vacated and remanded on other grounds, 401 U.S. 987 (1971). See also
Sullivan v. Murphy, 478 F.2d 938, 968 (D.C. Cir.), cert. denied, 414 U.S. 880 (1973);
Wilson v. Webster, 467 F.2d 1282, 1284 (9th Cir. 1972); Bilick v. Dudley, 356 F.
Supp. 945 (S.D.N.Y. 1973).
133. See Menard v. Mitchell, 328 F. Supp. 718 (D.D.C. 1971), modified, 498 F.2d
1017 (D.C. Cir. 1974).
134. See Menard v. Saxbe, 498 F.2d 1017 (D.C. Cir. 1974). Referring to the FBI's
information network (the "Identification Division"), the Court of Appeals, echoing
the district judge's opinion in Menard, stated that it was
"out of effective control." . . [There is no followup to assure that records
.
of arrest frequently are amended to show an ultimate non-criminal disposi-

tion. There are no controls on the accuracy of information submitted by the
contributing agencies.
Id. at 1026.
The court's characterization of the FBI information network in Menard v. Saxbe
is also applicable to the information gathering practices of the commercial credit
reporting industry. This becomes apparent in light of the well-documented prac-
tices of certain of the larger members of the commercial credit reporting industry,
such as "zinging," "telephoning," quotas for adverse information, requiring an
the United States Court of Appeals for the District of Columbia

observed that serious consequences often result from disclosure of
information contained in arrest records. It noted that decisionmak-
ers oftentimes take into account solely the fact of arrest and are
unmoved by any subsequent exoneration from charges.13 On re-
mand, the district court declared that it was incumbent on the
government to show a "compelling public necessity" when it
engages in conduct . . . that clearly invades individual privacy by
revealing episodes in a person's life of doubtful and certainly not
determined import .... "I
In view of these fourth amendment precedents and the severe conse-
quences which may result from the unauthorized and unwarranted
disclosure of highly personal information, it is clear that commercial
credit bureaus should be held to the same "compelling interest"
standard asserted by the court in Menard.
E. The PreferredApproach
In Roe v. Wade, the Supreme Court decided that the right to
privacy was broad enough to encompass the right to an abortion on
the following grounds:
unreasonably high number of credit reports from each investigator, and the relative
laxity of the regulations imposed by the FCRA. See notes 1-8, 63, 85, 86 & accom-
panying text supra.
135. 430 F.2d 486 (D.C. Cir. 1970).
136. Id. at 490. This observation by Chief Judge Bazelon has special relevance
to section 1681i(b) which ostensibly covers the situation in which items of disputed
accuracy find their way into a consumer's credit file. Section 1681i(b) provides that
in case of dispute over the completeness or accuracy of any item of information
contained in the consumer's file, he or she may file a statement of not more than
one hundred words setting forth the nature of the dispute. The credit reporting
agency then has the option of either including the consumer's statement or a
summary thereof in any subsequent consumer report containing the information
in question. 15 U.S.C. § 1681i(c) (1970). Under these provisions, the injured con-
sumer is accorded wholly inadequate protection against the recording and dissemi-
nation of inaccurate information. Under Sections 1681i(b) and (c) there is no oppor-
tunity for subsequent exoneration, even of the type provided in Menard v. Saxbe.
Furthermore, although section 1681i(a) does provide for the deletion of inaccurate
information from a credit file, it is of little use to the injured consumer since the
decision to delete is entirely within the credit bureau's discretion. One solution to
this problem may be to severely restrict the type of information that may be
gathered in the first place regarding a consumer's credit worthiness, as well as to
permit injured consumers to redress in court their constitutional right to informa-
tional privacy.
137. 328 F. Supp. at 726. The court expressly noted that computerization of
information banks considerably heightens the dangers.
The detriment that the State would impose upon the pregnant
woman by denying this choice altogether is apparent. Specific and
direct harm medically diagnosable. . . may be involved. . . . Psy-
chological harm may be imminent. Mental and physical health may
be taxed by child care. There is also the distress, for all con-
cerned. . . . In other cases, as in this one, the additional difficulties
and continuing stigma of unwed motherhood may be involved. 3"
Although a denial of employment, credit, or insurance may not, in
most cases, be as vital as a denial of an abortion, a strong argument
can be made that significant disruptions in the proper biological
and psychological functions of an individual may result from the
dissemination of highly personal information and subsequent denial
of the aforementioned benefits.'3 9
While a right to privacy has been recognized in the fourth amend-
ment,"' the more reasonable approach in the context of credit re-
porting and informational privacy is that presented by the Supreme
Court in Roe v. Wade. In view of the fundamental nature of privacy,
and the personal damage that may result if that right is violated by
the practices of credit bureaus, it is clear that the constitutional
right to privacy as established in Roe should be of sufficient scope
to protect the consumer from unwarranted forays into his personal
history by commercial credit bureaus.'
138. 410 U.S. at 153. Mr. Justice Douglas, in his concurring opinion in Roe,
elaborated upon those "certain rights . . . retained by the people" in the ninth
amendment, which include the
rights, amenities, privileges, and immunities that come within the sweep of
"the Blessings of Liberty" mentioned in the preamble to the Constitution.
Id. at 210.
He then went on to delineate those rights that come within the meaning of the term
"liberty" as it is used in the fourteenth amendment:
First is the autonomous control over the development and expression of
one's intellect, interests, tastes, and personality.
Second is freedom of choice in the basic decisions of one's life respecting

marriage... procreation... and the education ... of children.
Third is the freedom to care for one's health and person, freedom from
bodily restraint or compulsion, freedom to walk, stroll, or loaf.
Id. at 211, 213.
139. See notes 110-18 & accompanying text supra.
140. See notes 105, 107, 126-28 & accompanying text supra.
141. This, of course, presumes that commercial credit bureaus, by virtue of state
action, are subject to the "Fourteenth Amendment's concept of personal liberty
and restrictions upon state action." Roe v. Wade, 410 U.S. 113, 153 (1973). See text
accompanying notes 142-260 infra.
IV. STATE ACTION

A. Introduction
The foregoing constitutional argument for a fundamental right to
informational privacy in the context of credit reporting rests on the
assumption that the requirements of federal governmental action
pursuant to the fifth amendment"' or state action pursuant to the
fourteenth amendment" can be satisfied. The purpose of this sec-
tion is to examine the relationship of commercial credit bureaus to
federal and state governments in order to determine whether a con-
stitutionally impermissible form of state action exists.
The Civil Rights Cases saw the first attempt to establish a test
of state responsibility under the fourteenth amendment. The major-
ity was of the opinion that the fourteenth amendment
nullifies and makes void all . . .State action of every kind, which
impairs the privileges and immunities of citizens of the United
States, or which injures them in life, liberty or property without due
process of law, or which denies to any of them the equal protection
of the laws."'
Mr. Justice Harlan, in his noted dissent, rejected the "narrow and
artificial" ' grounds upon which the majority had based its restric-
tive view of the fourteenth amendment and the power of Congress
to legislate pursuant thereto. 4 ' He argued that, in terms of the
142. The fifth amendment is a limitation on federal government action. It pro-
vides in part:
No person shall be . . . deprived of life, liberty, or property, without due
process of law ....
U.S. CONsT. amend. V.
143. The fourteenth amendment is a limitation on state action and provides in
part:
No State shall ... deprive any person of life, liberty, or property, without
due process of law ....
U.S. CONsT. amend. XIV, § 1.
144. 109 U.S. 3, 11 (1883).
145. Id. at 26.
146. The Civil Rights Court concluded that
an act of refusal [of admission to a public inn on the grounds of race] has
nothing to do with slavery . . . and that if it is violative of any right of the
party, his redress is to be sought under the laws of the State; or. . .in the
corrective legislation which Congress has adopted. . . for counteracting the
effect of State laws, or State action, prohibited by the Fourteenth Amend-
ment.
Id. at 24.
In distinguishing between direct federal legislation on matters respecting which
practical enforcement of the fourteenth amendment, corporations

charged with a duty to the public are subject to governmental regu-
lation, and that
a denial, by these instrumentalities of the State, to the citizen...

of civil rights secured to him by law, is a denial by the State, within
the meaning of the Fourteenth Amendment ....
What I affirm is that no State. . . nor any corporation. . . wielding
power under State authority . . . can, consistently either with the
freedom established by the fundamental law, or with that equality
of civil rights which now belongs to every citizen, discriminate
against . . . citizens, in those rights .... "I
Thus, for citizenship to have any meaning, it must include freedom
from discrimination, not only by states, but also by individuals or
corporations exercising public functions or authority.'4 8
the States are prohibited from making or enforcing certain laws, and corrective
legislation necessary for redressing or offsetting the effect of such laws or acts, the
Court held that Congress could only pass corrective and not direct legislation
pursuant to the fourteenth amendment. Mr. Justice Harlan found this interpreta-
tion of the amendment "plainly repugnant to its fifth section." I1. at 54.
147. Id. at 59.
148. Id. at 58-60. In arriving at this inescapable conclusion, Mr. Justice Harlan
stated:
I am of the opinion that such discrimination practised by corporations and
individuals in the exercise of their public or quasi-public functions is a badge
of servitude the imposition of which Congress may prevent under its power
to enforce the Thirteenth Amendment ....
What I affirm is that no State, nor the officers of any State, nor any corpora-
tion or individual wielding power under State authority for the public benefit
or the public convenience, can, consistently either with the freedom estab-
lished by fundamental law, or with that equality of civil rights which now
belongs to every citizen, discriminate against . . . citizens, in those
rights ....
To-day, it is the colored race which is denied, by corporations and individuals

wielding public authority, rights fundamental in their freedom and citizen-
ship.
Id. at 43, 59, 62 (Harlan, J., dissenting).
Although written nearly a century ago and in reaction to a Court which had just
declared the first and second sections of the Civil Rights Act of 1875 unconstitu-
tional, this dissent is particularly relevant today in view of the emergence of mas-
sive corporations such as credit bureaus. These corporations, "wielding power
under State authority," clearly possess the power, through manipulation of infor-
mation systems, to deny individuals "rights fundamental in their freedom and
citizenship." Subsequent case law has embraced and expanded the principles ex-
pressed by Mr. Justice Harlan. See text accompanying notes 149-86 infra.
Recent years have seen a broad expansion of the scope of the

fourteenth amendment. State action may be executive, legislative,
or judicial, and may be found regardless of whether the state itself
acts. The state is responsible when it delegates, authorizes, or ac-
quiesces in the exercise by "private" bodies of functions that are
essentially "governmental" or "public" in nature. For example, in
Smith v. Allwright the Supreme Court refused to hold that the
assertedly "private" nature of the Texas Democratic Party was con-
clusive on the question, finding instead that the party's activities
constituted state action for two reasons: 1) the comprehensive
regulation and supervision of the primary by the state; and 2) the
governmental function served by the primary. In Kerr v. Enoch
Pratt Free Library,'50 the United States Court of Appeals for the
Fourth Circuit applied the fourteenth amendment to a privately-
endowed library which received funds from the state. Discrimina-
tion by the library was held to be state action in violation of the
fourteenth amendment.
A state is also responsible when it permits a corporation to govern
a community of citizens and that corporation deprives those citizens
of their first amendment rights. 5 ' In Cooper v. Aaron,5 2 state re-
sponsibility was interpreted as necessarily following upon "state
149. 321 U.S. 649 (1944). In Smith petitioner sought damages on the ground that
respondent election judges had refused to permit him to vote in a Democratic
primary because of his race and color. The court held that this exclusion of blacks
from voting in a Democratic primary was state action in violation of the fifteenth
amendment. Id. at 663, 666. See also Terry v. Adams, 345 U.S. 461 (1953) (depriva-
tion of petitioners' right to vote by combined election machinery of an all-white
political association and the Democratic Party violated the fifteenth amendment);
Nixon v. Condon, 286 U.S. 73 (1932) (action by Executive Committee of Texas
Democratic Party adopting resolution that only white Democrats should partici-
pate in primary elections was state action within the meaning of the fourteenth
amendment).
150. 149 F.2d 212 (4th Cir.), cert. denied, 326 U.S. 721 (1945) (fact that private
library received substantial support from the state established that the library was
an instrumentality of the state; consequently, refusal to admit blacks to library
training program violated the fourteenth amendment).
151. See Marsh v. Alabama, 326 U.S. 501, 509 (1946).
152. 358 U.S. 1 (1958). In Cooper the Supreme Court rejected petitioners' efforts
to suspend temporarily their plans for desegregating the local school system. Chief
Justice Warren, writing for the Court, stated:
State support of segregated schools through any arrangement, management,
funds, or property cannot be squared with the [fourteenth] Amendment's
command that no State shall deny to any person within its jurisdiction the
equal protection of the laws.
Id. at 19.
participation through any arrangement, management, funds or

property."' 5 3 A state is responsible not only for the conduct of pri-
vate parties to whom it leases state property,' 4 but also, as in Public
Utilities Commission v. Pollak,'55 when it asserts its interest and
authority in private activity, even though the state refrains from
regulating it. The state should also be held responsible where pri-
vate organizations such as labor unions operate pursuant to a sys-
tematic scheme of statutory regulation and conduct. 5' Mr. Justice
Douglas, concurring in Garnerv. Louisiana,'57 would also find state
action where there is conduct by an enterprise "affected with the
public interest . . . where facilities of a public nature are in-
volved,'18 and where a state licenses a business.
In Moose Lodge v. Irvis,'59 the Supreme Court, although rejecting
153. Id. at 4.
154. See Burton v. Wilmington Parking Authority, 365 U.S. 715 (1961).
155. 343 U.S. 451 (1952). See text accompanying notes 229-31 infra.
156. See Railway Employees' Dep't v. Hanson, 351 U.S. 225 (1956) (union shop
provision of Railway Labor Act prohibiting discrimination by labor organizations
was within the power of Congress under the Commerce Clause and did not violate
either the first or fifth amendments).
157. 368 U.S. 157 (1961).
158. Id. at 181 (Douglas, J., concurring). In Gamerpetitioners were arrested and
charged with disturbing the peace after refusing a request by police officers that
they leave the lunch counter at which they were sitting. The Court held that the
convictions were so totally devoid of evidentiary support as to violate the due
process clause of the fourteenth amendment. Justice Douglas, addressing the issue
of state action and private enterprises, stated:
A business may have a "public interest" even though it is not a "public
utility" in the accepted sense, even though it enjoys no franchise from the
State, and even though it enjoys no monopoly.
Id. at 182 (Douglas J., concurring).
Applying these criteria to the subject of this comment, it is clear that commercial
credit bureaus "have a public interest" sufficient to bring them within the scope
of the state action doctrine. Credit bureaus have all the ingredients of a public
utility. See note 104 supra.Even if they enjoy no "franchise" from the state, certain
credit bureaus "enjoy" monopoly status and have been prosecuted under the anti-
trust laws. For example, in Credit Bureau Reports, Inc. v. Retail Credit Corp., 476
F.2d 989 (5th Cir. 1973), the court found that Retail Credit Company had violated
the antitrust laws by monopolizing the insurance reporting market and by attempt-
ing to monopolize the nonlocal credit reporting market. An injunction enjoining
Retail Credit from continuing these practices was issued.
159. 407 U.S. 163 (1972). In Moose Lodge, appellee Irvis, a guest of a member of
appellant Moose Lodge, was refused service by appellant because of his race. The
Court held that
the operation of the regulatory scheme enforced by the Pennsylvania Liquor
Control Board does not sufficiently implicate the State in the discriminatory
the argument that state action is involved solely by virtue of state

licensing of a private club, reaffirmed and redefined the concept of
state action. Justice Rehnquist, writing for the majority, in discus-
sing the indicia by which to determine whether there is sufficient
state involvement to convert otherwise private action into that gov-
erned by the fourteenth amendment, was careful not to break with
the principles laid down previously in Reitman v. Mulkey'" and
Burton v. Wilmington Parking Authority.' He suggested that
whether a state plays a role equivalent to that of a partner or joint
venturer in the discriminating enterprise and whether the state con-
fers a monopoly 2 upon a private enterprise-which discriminates are
guest policies of Moose Lodge so as to make the latter "state action" within
the ambit of the equal protection clause of the Fourteenth Amendment.
Id. at 177.
160. 387 U.S. 369 (1967). In Reitman, the Court held that article I, section 26 of
the California Constitution, which prohibited the state from abridging the right of
any person to sell, lease, or rent his property in any way he chose, was unconstitu-
tional in that it involved the state in private racial discrimination contrary to the
fourteenth amendment. In analyzing the criteria for determining whether the state
has become sufficiently involved with private discriminations so as to warrant a
finding of state action, Reitman reaffirmed several earlier principles establishing
impermissible state action. For example, the exercise of power by the executive
committee of a political party to prescribe the qualifications of its members for
voting was viewed as an expression of state authority contrary to the fourteenth
amendment. Id. at 379.
Unconstitutional state action was also found where blacks, refused service at a
restaurant, were prosecuted as trespassers. See Robinson v. Florida, 378 U.S. 153
(1964); Peterson v. City of Greenville, 373 U.S. 244 (1963). In neither case was any
proof required that the restaurant owner had actually been influenced by the stat-
utes and regulations in question. Finally, mere statements by local officials to the
effect that the city would not permit blacks to seek desegregated service in restau-
rants were deemed to have sufficient coercive potential to establish state action in
violation of the fourteenth amendment. 378 U.S. at 156-57 (1964).
161. 365 U.S. 715 (1961). In Burton, the Court held that a private restaurant
operated under lease in a state parking garage could not refuse service on racial
grounds. On the basis of an exhaustive analysis of the relationship between the
lessee and the parking authority, the Court concluded that
[b]y its inaction, the Authority, and through it the State, has not only made
itself a party to the refusal of service, but has elected to place its power...
and prestige behind the admitted discrimination. The State has so far insin-
uated itself into a position of interdependence with Eagle [the restaurant
owner] that it must be recognized as a joint participant in the challenged
activity, which, on that account, cannot be considered to have been so
"purely private" as to fall without the scope of the Fourteenth Amendment.
Id. at 725.
162. In Credit Bureau Reports Inc. v. Retail Credit Corp., 476 F.2d 989 (5th Cir.
two important factors by which to ascertain the extent of state

involvement in the otherwise private conduct.1 3 Thus, while the
particular state regulation in Moose Lodge was found not to encour-
age racial discrimination,' 4 the fundamental values"' inherent in
the concept of state action remain undisturbed.
The most recent analysis of the state action doctrine in the area
of privately owned electric power companies was set forth by the
Supreme Court in Jackson v. MetropolitanEdison Co. "I In Jackson,
petitioner sued a privately owned and operated electric utility under
section 1983 for termination of her electric service without prior
notice, hearing, or opportunity to pay any amounts found due." 7
The Court held that there was insufficient state involvement in the
termination of benefits to make it state conduct." 8 In dealing with
petitioner's contention that state action was present because re-
spondent provided an essential public service, the Court deferred to
state court decisions in the area which rejected the concept that
1973), the court held that Retail Credit was a monopoly in several major areas of
the credit reporting industry and found numerous violations of the antitrust laws
because Retail Credit had monopolized the insurance reporting market, attempted
to monopolize non-local credit reporting, and acquired local credit bureaus. 476
F.2d at 991.
163. 407 U.S. at 177.
164. Id. at 176, 177.
165. In Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970), Justice Brennan
captured the essence of the state action concept:
The state-action doctrine reflects the profound judgment that denials of
[constitutional rights] . . . are singularly grave when government has or
shares responsibility for them. Government is the social organ to which all
in our society look for the promotion of liberty, justice, fair and equal treat-
ment, and the setting of worthy norms and goals for social conduct. Therefore
something is uniquely amiss in a society where the government, the authori-
tative oracle of community values, involves itself in racial discrimination.
Accordingly, . . . the cases that have come before. . . this Court. . . repre-
sent vigilant fidelity to the constitutional principle that no State shall in any
significant way lend its authority to the sordid business of racial discrimina-
tion.
Id. at 190-91 (Brennan, J., concurring).
In a like fashion, "something is uniquely amiss in a society where the government,"
reaps benefits from an industry regulated by an extensive, complex scheme of
federal and state laws and administrative agencies, where that industry is engaged
in practices which violate a citizen's right to informational privacy.
166. 43 U.S.L.W. 4110 (Dec. 23, 1974).
167. Id. at 4111. For the text of 42 U.S.C. § 1983 (1970) see note 242 infra. See
also note 243 infra.
168. 43 U.S.L.W. at 4114.
furnishing utility services was a state function.'69 Although ulti-

mately rejecting any finding of state action, the Jackson Court re-
fused to emasculate past precedents, stating:
We have of course found state action present in the exercise by a
private entity of powers traditionally exclusively reserved to the
State. . . . If we were dealing with the exercise by Metropolitan [the
private utility] of some power delegated to it by the State which is
traditionally associated with sovereignty, such as eminent domain,
our case would be quite a different one.'70
In "sifting facts and weighing circumstances" as to the "involve-
ment of the State in private conduct,"'' it becomes clear that, in
the context of the credit reporting industry, Jackson may be distin-
guished on several grounds. In Jackson the electric utility operated
only pursuant to state law, 72 but credit bureaus are subject to exten-
sive federal as well as state regulatory schemes. 73 Secondly, while
the utility in Jackson provided service on a local basis only, major
credit reporting companies are clearly national in their scope of
operation. Thirdly, the Federal Trade Commission has investigated
the credit reporting industry in a manner similar to the investiga-
tion in Public Utilities Commission v. Pollak that provided a basis
for finding state action, 74 yet no such investigation of the private
utility occurred in Jackson.7 5 Finally, unlike the circumstances in
Jackson,commercial credit bureaus are employed by various federal
agencies to perform functions essential to the operation of those
agencies. 17 Thus, while the Jackson case might establish precedent
for a defense to a simple fourteenth amendment claim, it has no
bearing on a fifth amendment claim which would depend on sub-
stantial federal, as opposed to state, involvement with the credit
169. Id. at 4112 (citations omitted). The authors' research has disclosed no deci-
sion rejecting the proposition that the functions performed by credit bureaus are
governmental in character.
170. Id.
171. Burton v. Wilmington Parking Authority, 365 U.S. 715, 722 (1961).
172. 43 U.S.L.W. at 4114.
173. See text accompanying notes 191-210 infra. It should be noted that the
credit reporting industry is regulated by nine federal agencies, whereas the utility
in Metropolitanwas regulated by none.
174. See Public Utilities Comm'n v. Pollak, 343 U.S. 451, 462 (1952). See also
note 220 infra.
175. An examination of Pollak will reveal that it was precisely this form of
investigation which triggered a finding of governmental action pursuant to the fifth
amendment in that case. 343 U.S. at 462.
176. See text accompanying notes 155-64 supra.
reporting industry. Furthermore, the substantial federal action

present in credit reporting is in addition to the factors present in
Jackson and might, indeed, form the basis for a finding of "state"
action under the fourteenth amendment.
B. Federal v. State Action

In terms of the matter at hand, that is, what constitutional limi-
tations may be imposed on traditionally "private" corporations that
violate an individual's right to informational privacy, little clarity
is gained by distinguishing between the labels "federal" and "state"
governmental action. The concern here is with quasi-public corpora-
tions of immense size, heavily regulated by both federal and state
governments, performing functions which the government would
otherwise have to perform in their absence, and providing the gov-
ernment with benefits in the form of information on individual citi-
zens.
That the invasion of a citizen's right to informational privacy is
accomplished by a corporation "pervasively" regulated by the fed-
eral government but only "significantly" (and not pervasively) regu-
lated by state government should be of small consequence in terms
of whether constitutional restraints on the corporation are to be
imposed. Government is regulating the credit reporting industry
through a "sustained and detailed administrative relationship for
enforcement of statutory . . . standards."'77 The extent and intru-
siveness of the federal governmental regulatory scheme in credit
reporting is clearly greater than was the federal involvement in the
operations of Capitol Transit in Public Utilities Commission v.
Pollak.' State involvement with the credit reporting industry,
again through an extensive scheme of statutes and administrative
agencies, as well as through state chartering and licensing (which
may be viewed as a form of state approval) of commercial credit
bureaus, appears to be at least as pervasive as was the state's "inac-
tion" in Reitman v. Mulkey;'7 9 or the state's involvement in the
quasi-public housing projects in Joy v. Daniels,' McQueen v.
177. Walz v. Tax Comm'n, 397 U.S. 664, 675 (1970). SeeFCRA, 15 U.S.C. §§
1681-81t (1970). See also CAL. CIV. CODE ANN. §§ 1785.1-.8 (West Supp. 1973);
CONN. GEN. STAT. §§ 36-431-35 (Supp. 1974-75); New York Credit Data Report-
ing Act, N.Y. GEN. Bus. LAW §§ 370-76 (McKinney 1970).
178. 343 U.S. 451 (1952). See text accompanying notes 199-208 infra.
179. 387 U.S. 369 (1967). See note 139 supra.
180. 479 F.2d 1236 (4th Cir. 1973). In Joy a "low-income" tenant challenged
threatened eviction by her private landlord on the grounds that it violated proce-
Druker,8 1 and Anderson v. Denny.8 2 For these reasons as well as

dural due process under the fifth and fourteenth amendments. Judge Craven,
writing for a unanimous court, held that on the basis of broad federal regulation of
the project pursuant to the National Housing Act [12 U.S.C. § 17151(d)(3)
(1970)], and state approval of the federal participation, sufficient state action
existed under the fourteenth amendment to render constitutional guarantees
applicable to the private landlord. Id. at 1239.
The participation of the federal government in such housing projects is
conditioned upon state approval. The state is thus involved for there would
otherwise be no federal direct. . . and indirect funding. . . . We think that
these factors coupled with utilization of state eviction procedure have "so far
insinuated [the state] into a position of interdependence" with the defen-
dant that the challenged activity "cannot be considered to have been so
'purely private' as to fall without the scope of the Fourteenth Amendment."
. . Accordingly, we hold there is sufficient state involvement to constitute
"state action" for purposes of the fourteenth amendment. We also hold that
the facts are sufficient to satisfy the "under color of" law clause of 42 U.S.C.
§ 1983.
Id. at 1239 (citations omitted).
It should be emphasized that the Joy court used both federal and state involvement
in the project to arrive at a finding of state action under the fourteenth amendment.
This approach has special relevance to the matter at hand when it is remembered
that the Supreme Court in Roe v. Wade held that right to privacy was "founded
in the Fourteenth Amendment's concept of personal liberty and restrictions upon
state action . . . ." 410 U.S. 113, 153 (1973).
181. 317 F. Supp. 1122 (D. Mass.), aff'd, 438 F.2d 781 (1st Cir. 1971). In
McQueen private landlords had received financial assistance from the federal gov-
ernment under the National Housing Act and from the state government in con-
structing the housing project. The issue presented was whether in evicting tenants
for having exercised their first amendment associational rights, the private land-
lords were subject to the first, fifth, and fourteenth amendments. Chief Judge
Wyzanski, writing for the district court, held:
The federal and state governments have elected to place their power, pres-
tige, and privilege behind the landlords' authority over the tenants, and have
insinuated themselves into a position of interdependence with the land-
lords. . . . [T]heir actions in relation to their tenants cannot be considered
so private as to fall without the scope of the First, Fifth and Fourteenth
Amendments.
Id. at 1128.
182. 365 F. Supp. 1254 (W.D. Va. 1973). This case, like Joy [see note 180 supra],
involved the question of whether eviction procedures employed by a private land-
lord complied with the due process clauses of the fifth and fourteenth amendments.
Judge Turk, writing for the Anderson court, framed the issue as follows:
[Wihether the state or the federal government, or both, have become so
involved in the conduct of this otherwise private enterprise that its actions
are also the actions of these governments and performed under their aegis
without the private body necessarily becoming either their instrumentality
or their agent in a strict sense.
Id at 1256.
The court held that "government involvement" brought the actions of the private
landlord within the "ambit of 'state action.'" Id. at 1258.
Inasmuch as the case at bar. . . involved state approval for the purpose
of receiving rent subsidies, and the defendants . . . are also attempting to
use state eviction procedures, this court concludes that there is "state action"
Furthermore, the relationship of defendants to the federal government

[pursuant to the National Housing Act, tax benefits and rent supplements]
. . . is one of such intwinement and regulation as to bring defendants' ac-
tions within the scope of the Fifth Amendment as it applies to the federal
government.
Id. at 1258.
Judge Turk went on to note that the private landlords were performing a "govern-
ment function" in providing housing, and that
[rielated to the theory that defendants are performing a government func-
tion is the idea that defendants have the power to deprive their tenants of
government benefits. . . . It follows that the defendants, by electing to act
as a means of distributing these government subsidies, have made them-
selves government actors for purposes of the Fifth and Fourteenth Amend-
ments.
Id. at 1259.
In a similar fashion, commercial credit bureaus are performing a government func-
tion where they do the work of government agencies. See text accompanying notes
189-94 infra. Furthermore, where the private landlords in Anderson had the
power to deprive individuals of their essential but not fundamental interest in
housing [see Lindsey v. Normet, 405 U.S. 56 (1972)] commercial credit bureaus
clearly have the power to deprive individuals of their constitutional right to pri-
vacy. Thus, it should follow that credit bureaus, which are subject to extensive
federal and state regulation, by performing a government function and possessing
the power to invade the constitutional rights of individuals, "have made them-
selves government actors for purposes of the Fifth and Fourteenth Amendments
.... " 365 F. Supp. at 1259.
It is instructive here to recall the thesis advanced by Adolf A. Berle on the
question of whether a corporation, having achieved sufficient economic power to
make discrimination possible, should be "subject to constitutional tests as to its
practices and regulations merely because it is a corporation." Berle, Constitutional
Limitations on CorporateActivity-Protection of Personal Rights From Invasion
Through Economic Power, 100 U. PA. L. REv. 933, 951 (1952) [hereinafter cited as
Berle].
[Tihe corporation, itself a creation of the state, is as subject to constitu-
tional limitations which limit action as is the state itself. . . . [A] corpora-
tion having economic and supposedly juridical power to take property...
or otherwise to violate constitutional limitations, is subject to direct legal
action. . ..
The Bill of Rights and the Fourteenth and Fifteenth Amendments would
thus have direct application to and also throughout any corporation whose
position gave it power. The preconditions of application are two: the undenia-
those discussed below, constitutional limitations should be imposed

on commercial credit bureaus whether the requisite governmental
action is found pursuant to the fifth amendment, fourteenth amend-
ment, or a combination of both. The evil sought to be prevented is
the same.
A broad view of state action finds strong support in the post-
s3 Jackson in-
Moose Lodge case of Jackson v. Statler Foundation."
volved an action brought against private, charitable foundations for
alleged racial discrimination. The United States Court of Appeals
ble fact that the corporation was created by the state and the existence of
sufficient economic power concentrated in this vehicle to invade the constitu-
tional right of an individual to a material degree.
But, if there is [economic] power, accompanied by invasion of an individual

right guaranteed by the Constitution, then it would seem that the mere
enjoyment of a state corporate charter is sufficient justification for invoking
operation of the Fourteenth and Fifteenth Amendments.
Id. at 942-43, 951-52.
In terms of the instant case, commercial credit bureaus such as RCC are chartered
by the state as corporations. Thus, it may be said that they are "created by the
state." Furthermore, when it is recognized that the total receipts of consumer credit
reporting bureaus are probably in excess of one billion dollars [Hearings on S.2360,
supra note 1, at 637-38], it becomes clear that these bureaus possess "sufficient
economic power. . . to invade the constitutional right of an individual to a mate-
rial degree." Berle, supra, at 943.
183. 496 F.2d 623 (2d Cir. 1974). See also McGlotten v. Connally, 338 F. Supp.
448 (D.D.C. 1972) (three judge court). In McGlotten the issue presented was
whether the granting of federal tax benefits to fraternal and nonprofit organizations
which excluded whites from membership constituted sufficient governmental ac-
tion to invoke the fifth amendment and the 1964 Civil Rights Act. The court held
that
the Government has become sufficiently entwined [through federal tax bene-
fits to organizations which excluded whites from membership] with private
parties to call forth a duty to ensure compliance with the Fifth Amendment
by the parties through whom it chooses to act.
Id. at 456-57.
Analyzing the "murky waters of the 'state action' doctrine," Chief Judge Bazelon,
writing for the McGlotten court, observed that this doctrine reaches governmental
action pursuant to both the fifth and fourteenth amendments:
Since the grant of tax benefits is certainly an act of the state, it might be
more accurate to state the question as whether the act of exemption violates
the Fifth Amendment. . . .Nonetheless, the determination of when state
involvement is sufficient . . . to bring otherwise private discrimination
within the aegis of the Fifth or FourteenthAmendment . . .has traditionally
been styled one of "state action." Little clarity is gained. . . by attachinga
different label to the same inquiry depending on who is the defendant.
Id. at 455 n.31 (emphasis added) (citations omitted).
for the Second Circuit remanded the case and held that a finding
of state action would be appropriate if the defendant foundations
were substantially dependent on their tax exempt status. In arriving
at this conclusion, the court relied on three grounds: 1) the federal
and state regulatory scheme under which the charitable foundations
operated was both detailed and intrusive; 2) it carried connotations
of governmental approval; and 3) the foundations were performing
a public function. The court further observed that
even if one of these factors is absent, a finding of "state action" may
still be appropriate.""
Addressing the nature of the constitutional treatment which should
be given to the appellant's challenges based on the federal and state
exemptions, 85 Judge Smith, writing for the majority, stated:
Since the two exemptions are clearly linked in practice . and in
purpose and since the evil against which the Fifth and the Fourteenth
Amendments were set was governmental fostering of racial discrimi-
nation and not merely state or merely federal action, similar treat-
ment for constitutionalpurposes seems proper.8
C. The Relationship Between Commerical Credit Bureaus and
Federal Agencies
In an effort to learn more about the relationship between credit
bureaus and the federal government, one of the authors sent letters
of inquiry to the heads of various federal agencies"'7 requesting that
they describe the nature of the relationship that exists between their
agency and the commercial credit bureaus regulated by the
FCRA.18 The results may be summarized as follows.
184. 496 F.2d at 634.
185. The federal scheme regulating tax exempt organizations under the income
tax laws is one of the broadest in the Internal Revenue Code and Regulations
promulgated pursuant thereto. See INT. Rsv. CODE OF 1954, § 501-03, 507-09,
511-14; Treas. Reg. §§ 1.501(a)-i to .522-4, 143.3 & .6 (current regulations).
186. 496 F.2d at 635 (emphasis added).
187. The federal agencies contacted included the Export-Import Bank of Wash-
ington, the Farm Credit Administration, the Federal Deposit Insurance Corpora.
tion, the Federal Home Loan Bank Board, the Department of Health, Education
and Welfare (Public Health Service), the Department of State (Agency for Interna-
tional Development), and the Veterans Administration. These agencies were se-
lected because a nexus between them and commercial credit bureaus was indicated
in an article by Robert M. McNamara, Jr., The Fair Credit Reporting Act: A
Legislative Overview, 22 J. PuB. LAW 67, 86 (1973).
188. The letters of inquiry sent to each agency and the responses thereto are on
file in the office of the American University Law Review.
1. Federal Home Loan Bank Board

Although not normally utilized by the Board, credit bureau re-
ports "could be us6ful under some circumstances, for example in
connection with enforcement matters." ' 9
2. Veterans Administration
In order "to determine that the repayment terms of [a VA] loan
bear a proper relation to the veteran's present and anticipated in-
come and expenses, and that the veteran is a satisfactory credit
risk,"'9 0 the VA obtains credit reports on the following individuals:
a. Applicants for VA ... loans;
b. Prospective purchasers of VA acquired properties;
c. Prospective purchasers of property securing a VA loan ....
The Department of Housing and Urban Development has entered

into a contract with several credit reporting agencies for furnishing
credit reports. This contract is intended to insure that government
agencies assisting citizens obtain home financing can obtain such
reports containing sufficient data at a reasonable price. Under this
contract, reports will be furnished to VA ....
. . . VA will accept any report containing substantially the same
information as the contract source."'
3. Department of Health, Education, and Welfare
HEW, pursuant to its Federal Insured Student Loan Program,
employs the services of
both the Retail Credit Company of Atlanta, Georgia and the Credit
Bureau Reports, Inc. of New York City (with regard to a collection
program) to recover funds paid on behalf of defaulted student bor-
rower [sic] participating lenders. Specifically, reports from Retail
Credit Company are valuable in making the determination of the
defaulted borrower'sability to repay and reportsfrom Credit Bureau
Reports are valuable in the efforts to locate students whose addresses
have changed.'9
189. Letter from the Federal Home Loan Bank Board to Richard H. Goldstein,
March 27, 1974.
190. Whether credit bureaus are at all competent to provide this sort of informa-
tion has been severely questioned. See note 11 supra.
191. Letter from the Veterans Administration to Richard H. Goldstein, April 17,
1974.
192. Letter from the Department of Health, Education and Welfare to Richard
H. Goldstein, March 12, 1974 (emphasis added).
4. Department of Housing and Urban Development

HUD appears to make extensive use of credit reports from com-
mercial sources, particularly in regard to the FHA single family
mortgage insurance program.
To fulfill our need for honest and accurate credit reporting, the De-
partment enters into annual credit reporting contracts under formal,
advertised competitive bidding procedures. While FHA will accept
applications for mortgage insurance accompanied by credit reports
from any credit reporting service, we reserve the right to obtain inde-
pendent credit information from our contract source.'93
5. Federal Deposit Insurance Corporation
The FDIC . . utilize(s) the service of a credit bureau in connection
with its regulatory and liquidation activities. For example, the FDIC
may order a credit report in connection with the application of a new
bank for deposit insurance, or to facilitate the collection of a loan or
the liquidation of some other asset acquired from a closed insured
bank.' 4
In view of the close relationship between commercial credit bureaus
and federal agencies illustrated by these responses, the detailed and
intrusive federal regulatory scheme established by the FCRA, and
particularly the investigative and rulemaking powers accorded to
the FTC by this Act, 95 it is clear that sufficient federal involvement
exists in the operations of commercial credit bureaus to trigger gov-
ernmental action pursuant to the fifth amendment.
D. Credit Reporting as a Governmental Function

Several recent studies have demonstrated that commercial credit
bureaus perform the work of government agencies."' The federal
193. Letter from the Department of Housing and Urban Development to Richard
H. Goldstein, March 27, 1974.
194. Letter from the Federal Deposit Insurance Corporation to Richard H. Gold-
stein, March 8, 1974.
195. 15 U.S.C. § 1681s (1970) provides:
The Federal Trade Commission shall have such procedural, investigative,
and enforcement powers, including the power to issue procedural rules in
enforcing compliance with the requirements imposed under the subchapter
These investigative and rule making powers become especially relevant in deter-
mining whether governmental action exists pursuant to the fifth amendment in
light of the principles established by the Supreme Court in Public Utilities
Comm'n v. Pollak, 343 U.S. 451 (1952). See text accompanying notes 234-39 infra.
196. See McNamara, supra note 84, at 86-87; Hearings on Commercial Credit
government uses credit bureau reports not only to determine the

eligibility of individuals for loans and other governmental benefits,
but as an investigative tool as well. Use of credit bureaus as an
investigative arm of the federal government appears, however, to be
in direct violation of the industry's established purpose "to set the
highest priority on the protection of the rights and best interests of
the individual." ' Recognizing that the government's right to inves-
tigate is subject to constitutional restraints, such as the fourth
amendment's prohibition against unreasonable searches and sei-
zures, it is disturbing to note that the government does not bother
with obtaining search warrants prior to seeking information from
consumer credit bureaus. The credit bureaus rationalize their dis-
closure to federal agencies as "voluntary cooperation . . . in the
public interest." '98
Not only do government credit-granting agencies such as the Fed-
eral Housing Administration and the Veterans Administration em-
ploy the services of credit bureaus, but law enforcement agencies
such as the FBI and the IRS use them as well. According to congres-
sional testimony, members of the Associated Credit Bureaus and
the Retail Credit Company make their files available to the law
enforcers as a "public service"."9 Such conduct on the part of com-
mercial credit bureaus clearly indicates that they are engaged in
performing a governmental function.
The governmental function theory of state action is a well- 20
established judicial doctrine. For example, in Marsh v. Alabama,
the Supreme Court applied the fourteenth amendment to a private
corporation acting as a municipal government. In reversing a con-
viction for distribution of religious literature on the streets of a
Bureaus, supra note 9, at 1, 38, 90, 132, 160-63; Hearingson Retail Credit Co. of
Atlanta, Ga. Before the Subcomm. on Invasion of Privacy of the House Comm. on
Gov't Operations, 90th Cong., 2d Sess. 3, 22-23 (1968) [hereinafter cited as
Hearings on Retail Credit Co.].
197. Hearings on Retail Credit Co., supra note 196, at 5.
198. In this respect we have acted on the advice of counsel that there is no
legal prohibition against voluntary cooperation in lieu of insisting on a sub-
poena, search warrant, or other comparable legal procedure be followed by
the Government investigators. We have considered our voluntary cooperation
with these agencies to be in the public interest.
Id. at 23 (testimony of Mr. Burge).
199. See Hearings on Commercial Credit Bureaus, supra note 9, at 134-38;
Hearings on Retail Credit Co., supra note 196, at 149, 161; Hearings on S. 2360,
supra, note 1, at 732.
200. 326 U.S. 501 (1946).
privately-owned town, the Court drew analogies to private facilities

whose operation was essentially a public function and thus subject
to state regulation. Mr. Justice Black, writing for the majority,
stated:
[R]egulation [of facilities whose operation is a public function]
may not result in . . . operation of these facilities, even by privately
owned companies, which unconstitutionally interferes with and dis-
criminates against interstate commerce.
• . . The managers appointed by the corporation cannot curtail
liberty of the press and religion consistently with the purposes of the
Constitutional guarantees .... 21,
The power of the corporation to deny constitutional rights is not
limited to curtailing freedom of expression. Although in Marsh the
Supreme Court was confronted with a deprivation of first amend-
ment rights, the rationale expressed by Mr. Justice Black may be
applied to other constitutional guarantees as well.
Commercial credit bureaus, as indicated above, perform govern-
mental functions in gathering and disseminating information to
government agencies which is used by these agencies to carry out
their congressionally-authorized responsibilities. This is demon-
strated by the close working relationship between credit bureaus
and government, the ralatively free access to credit bureau files by
the government,20 2 and the extensive disclosures, made voluntarily
or otherwise, 23 by commercial credit agencies to governmental au-
thorities. In view of the personal and societal consequences inherent
in any violation of an individual's constitutional right to privacy,
and the governmental function performed by the credit reporting
industry, the actions of commercial credit bureaus cannot be con-
sidered so private as to fall outside the scope of the fifth and four-
teenth amendments. Clearly, "private" organizations should be
subject to constitutional limitations when they have the power to
violate constitutional rights in a manner similar to that of the
state.204
201. Id. at 506, 508.
202. But see FTC v. Retail Credit Co., 357 F. Supp. 347 (D.D.C. 1973), where
the court held that FTC authority pursuant to section 621 of the FCRA [15 U.S.C.
§ 1681s (1970)] was inadequate to authorize FTC access to the credit reports under
section 604. 15 U.S.C. § 1681b (1970).
203. See note 198 & accompanying text supra. See also 15 U.S.C. §§ 1681b,
1681f, 1681s (1970).
204. See, e.g., Amalgamated Food Employees Local 590 v. Logan Valley Plaza,
Inc., 391 U.S. 308 (1968) (where shopping center serves the business community
E. Credit Bureaus As FederalAgents

An alternative theory under which commercial credit bureaus
might be held liable for violating an individual's constitutional right
to privacy involves classifying credit bureaus as "federal agents."
Such a classification could be based on the degree to which the
government has intertwined itself with the operations of credit bur-
eaus. This is well illustrated by the government's use of credit bur-
eaus as an investigative tool as well as by the extensive regulation
and supervision of credit bureaus by several federal agencies pur-
suant to federal law."0 5 Although the Supreme Court in Bivens v. Six
Unknown Named Agents of Federal Bureau of Narcotics"' 0 was not
faced with the issue of what constituted a federal agent, the Court
did hold that a violation of a person's fourth amendment rights by
a federal agent acting under color of federal authority gives rise to
a cause of action against the agent for damages resulting from his
own conduct. It does not seem unreasonable to assert that commer-
cial credit bureaus, operating pursuant to federal law and regulated
and supervised by federal agencies, may be likened to "one who
demands admission under a claim of federal authority.""2 7 For ex-
ample, section 1681b(1) of the FCRA provides that "[a] consumer
and is open to the public, the state may not delegate power pursuant to its trespass
laws to the center to exclude members of the public who wish to exercise their first
amendment rights); Marsh v. Alabama, 326 U.S. 501 (1946); Jackson v. Statler
Foundation, 496 F.2d 623 (2d Cir. 1974); Anderson v. Denny, 365 F. Supp. 1254,
1258-59 (W.D. Va. 1973); Berle, supra note 182.
205. See FCRA, 15 U.S.C. § 1681s (1970). This section charges eight federal
agencies with the responsibility to ensure compliance with the requirements im-
posed by the FCRA.
206. 403 U.S. 388 (1971). Bivens, strictly construed, applied only to violations
of the fourth amendment by federal agents. This need not present any insurmount-
able difficulty with respect to its application to commercial credit bureaus since
the investigation performed by these bureaus in many cases may be viewed as an
unreasonable search.
207. Id. at 394. See also United States v. Bremicker, 265 F. Supp. 701 (D. Minn.
1973), which involved a proceeding to enforce a summons issued by an Internal
Revenue Service agent requiring a bank to produce records on several of its deposi-
tors. In holding that neither the asserted bank-depositors confidential relationship,
nor the FCRA prohibited the bank from responding to the summons, the court
stated:
It is our opinion that the Fair Credit Reporting Act was not designed to apply
to tax investigations conducted by the Internal Revenue Service. ...
Even if we assume for purposes of this case that the records requested here
are covered by the Act, § 1681b (1) allows for their production "in response
to an order of a court having jurisdiction to issue such an order."
Id. at 703.
reporting agency may furnish a consumer report under the following

circumstances . . . (1) In response to the order of a court having
2 8
jurisdiction to issue such an order.1
Thus, in the situation where a federal court orders a credit bureau
to investigate a particular individual and submit a report to the
court, the subject of the investigation and report would be in a
position similar to that of the petitioner in Bivens were the credit
bureau to violate the investigatee's constitutibnal right to privacy
or right to be free from unreasonable searches and seizures. 20 Fur-
thermore, since credit bureaus often perform the very functions
which the federal agency requesting the credit report would have to
perform but for the existence of the credit bureau, it seems reason-
able to permit the individual to assert "a cause of action under the
Fourth Amendment" and allow him "to recover money damages for
any injuries he has suffered as a result of the agents' violation of the
2 10
Amendment."
The' very essence of civil liberty certainly consists in the right of every
individual to claim the protection of the laws, whenever he receives
21
an injury. 1
Recognizing that "where federally protected rights have been in-
vaded, it has been the rule from the beginning that courts will be
alert to adjust their remedies so as to grant the necessary relief, ' 212
a cause of action for damages should lie in the case where the indi-
vidual who is the subject of the credit report seeks the protection
guaranteed by the Constitution.
The status of commercial credit bureaus as instrumentalities of the federal govern-

ment is further substantiated by the following quote from the Retail Credit Com-
pany's Manager Manual:
(Requests for file information from Federal authorities) usually come from
FBI men, and investigators from the intelligence units of the Internal Reve-
nue Service of the U.S. Treasury Department.
Hearings on S. 2360, supra note 1, at 732, quoting Foer, supra note 42.
208. 15 U.S.C. § 1681b(1) (1970).
209. In the event that this same situation occurred pursuant to an order of a state
court, then an additional ground for state action would be established under the
doctrine of Shelley v. Kraemer, 334 U.S. 1 (1948).
That the action of state courts ... is to be regarded as action of the State
within the meaning of the Fourteenth Amendment, is a proposition which
has long been established by decisions of this Court.
Id. at 14.
210. 403 U. S. at 397.
211. Marbury v. Madison, 5 U.S. (1 Cranch) 137, 161 (1803).
212. Bell v. Hood, 327 U.S. 678, 684 (1946).
F. Delegation of Powers: The CreditBureau as an Instrumentality

of the State
Another approach to the question of state action is to consider the
credit bureau as a state instrumentality because it exercises powers
delegated to it by the state through its corporate charter. This
213
theory finds support in Steele v. Louisville and Nashville Railroad
where the Supreme Court held that a labor organization had a duty
of fair representation without discrimination, and stated:
We think that the Railway Labor Act imposes upon the statutory
representative. . . at least as exacting a duty to protect equally the
interests of the members of the craft as the Constitution imposes
upon a legislature to give equal protection to the interests of those for
whom it legislates." '
In a concurring opinion, Mr. Justice Murphy observed that Con-
gress could not constitutionally delegate such powers to a private
organization without requiring it to recognize the constitutional
rights of individuals under the same standards applied to congres-
2 15
sional enactments.
Adolf Berle, in a thoughtful and well-reasoned article concerning
constitutional limitations on corporate activity,2 1 proposed that
corporations chartered by the state should be fully subject to consti-
tutional limitations. He argues that corporations are chartered to
fulfill a state purpose and receive substantial benefits from incorpo-
213. 323 U.S. 192 (1944). In Steele, the issue presented was whether the Railway
Labor Act imposed a duty on a labor organization, acting pursuant to statutory
authority, to represent all the employees in the craft without discrimination be-
cause of their race. Chief Justice Stone, writing for the Court, held that
the language of the act ... read in the light of the purposes of the act,
expresses the aim of Congress to impose on the bargaining representative of
a craft or class of employees the duty to exercise fairly the power conferred
upon it in behalf of all those for whom it acts, without hostile discrimination
against them.
Id. at 202-03.
214. Id.at 202.
215. Id. at 208-09. See also Brotherhood of R.R. Trainmen v. Howard, 343 U.S.
768 (1952), where the Court held that the Union could not use its power pursuant
to a federal act to discriminate. In so holding, the Howard Court followed the
principle established by Justice Murphy's concurrence in Steele: delegation of
power by the state to a private organization requires it to observe the constitutional
rights of individuals. See also Smith v. Allwright, 321 U.S. 649 (1944), where the
Court held a private political party to be a state instrumentality because of the
power delegated to it by the state to hold primaries.
216. Berle, supra note 182.
ration. Thus, where a corporation achieves sufficient economic

power to invade individual rights guaranteed by the Constitution,
and where such an invasion takes place,
it would seem that the mere enjoyment of a state corporate charter
is sufficient justification for invoking the operation of the Fourteenth
and Fifteenth Amendments." '
A primary objection to the "corporate charter" theory of state
action is that it proves too much. That is, if the simple act of
chartering makes a corporation an instrumentality of the govern-
ment, the scope of the fifth and fourteenth amendments might be
unreasonably broadened to include conduct which should rightfully
be deemed private.
Some limiting principle is clearly needed if the doctrine of govern-
217. Id. at 951-52. This proposition derives support from the principle that
whether the corporate privilege shall be granted or withheld is always a
matter of state policy. If granted, the privilege is conferred in order to achieve
an end which the State deems desirable.
Liggett Co. v. Lee, 288 U.S. 517, 545 (1933) (Brandeis, J., dissenting).
It follows that state action in granting the corporate charter assumes that the
corporation will not exercise its power in a manner forbidden to the state itself,
expecially when that power was granted to further a legitimate state purpose. Thus,
the doctrine set forth in the Civil Rights Cases,
"that a private wrong does not offend the Constitution," ceases to have
application if the wrong-doer is a corporation, enjoying the corporate privi-
lege and corporate powers by a grant from the state and thereby attaining a
position giving it power to commit the wrong.
Berle, supra note 182, at 952.
The proposition that governmental chartering of a corporation makes it an
instrumentality of the government has support in the case law. One example is
McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), in which the Supreme
Court held that state taxation of a federally-chartered corporation was unconstitu-
tional. The Court stated that the power to charter a bank is implied in the neces-
sary and proper clause of the Constitution since it was an appropriate means to
execute the enumerated powers of the federal government. McCulloch supports
Berle's thesis because it views the federally-chartered corporation as an instrumen-
tality of the government, designed to achieve the government's purpose. See also
Owensboro Nat'l Bank v. Owensboro, 173 U.S. 664 (1899), where the Court stated:
"National banks are instrumentalities of the Federal government, created
for a public purpose, and as such necessarily subject to the paramount au-
thority of the United States."
Id. at 667-68, quoting Davis v. Elmira Savings Bank, 161 U.S. 275, 283 (1896).
See also Kerr v. Enoch Pratt Free Library, 149 F.2d 212 (4th Cir.), cert. denied,
326 U.S. 721 (1945); Everett v. Riverside Hose Co., 261 F. Supp. 463 (S.D.N.Y.
1966) (institutions chartered by the state which are performing governmental func-
tions are instrumentalities subject to the fourteenth amendment).
mental action pursuant to the fifth and fourteenth amendments is

not to be extended beyond its proper bounds. One such principal
may be to require that the functions granted or delegated to the
corporation be " 'governmental' in scope or at least of substantial
public importance. ' 21 1 Alternative approaches to limiting the gov-
ernmental action doctrine would be to require, in addition to the act
of governmental chartering of the corporation, an intrusive govern-
mental regulatory scheme; or that the scheme connote government
approval of the corporation's activity; or that the corporation not
have "legitimate claims to recognition as a 'private' organization in
associational or other constitutional terms."219
'
G. Governmental Regulation of Commercial Credit Bureaus as

Grounds for Application of Contitutional Guarantees
Government delegation of power to private organizations is often
accompanied by regulation of such organizations through the inves-
tigative or rulemaking powers of various agencies. The existence of
such a regulatory scheme has certainly been the case with the credit
reporting industry. 20 The argument here is that
218. Schubert, State Action and the Private University, 24 RUTGERS L. REv. 323,
338 (1970).
219. Jackson v. Statler Foundation, 496 F.2d 623, 629 (2d Cir.), cert. denied, 411
U.S. 932 (1974).
220. The pervasive scheme of federal regulation of commercial credit bureaus is
established in part by the FCRA, 15 U.S.C. §§ 1681s(a), (b) (1970). Section
1681s(a) establishes the Federal Trade Commission as the primary administrative
agency charged with overseeing the operations of the credit reporting industry so
as to ensure compliance with the FCRA. This section provides the FTC with rule-
making authority:
The Federal Trade Commission shall have such procedural, investigative,
and enforcement powers, including the power to issue procedural rules in
enforcing compliance with the requirements imposed under this subchapter
and to require the filing of reports, the production of documents, and the
appearance of witnesses ....
15 U.S.C. § 1681s(a) (1970) (emphasis added).
Section 1681s(b) charges eight additional federal agencies with responsibility for
ensuring complaince with the requirements of the FCRA.
In Public Utilities Comm'n v. Pollak, 343 U.S. 451 (1952), the Court found a
"sufficiently close relation between the Federal Government and the radio service"
[id. at 462], provided by the Capital Transit Company, "a privately owned public
utility corporation" [id. at 454], to justify invoking the first and fifth amend-
ments. Id. at 462. In making this finding, the Court expressly disclaimed reliance
on the facts that Capital Transit operated a public utility and that Capital Transit
enjoyed a substantial monopoly of street railway and bus transportation in the
District of Columbia. Id. Instead, the Court placed primary reliance on the fact
that the Transit Company operated its services under the regulatory supervision
of a federal agency to which Congress had delegated investigatory powers. Id. This
closely parallels the investigatory authority conferred on the FTC by Congress in
the FCRA.
In Jackson v. Statler Foundation, 496 F.2d 623 (2d Cir.), cert. denied, 411 U.S.
932 (1974), the court held that if the the charitable foundations which had been
accused of racial discrimination were substantially dependent on their tax-exempt
status, then in view of the detailed regulatory scheme under which they operated,
a finding of state action may be appropriate. One factor on which the court relied
in making this finding was the requirement imposed on private charitable founda-
tions that they file an annual information return with the Internal Revenue Service.
496 F.2d at 630. In addition, the IRS "assured Congress that it is closely scrutiniz-
ing the activities of private foundations." Id. at 630. In a similar fashion, section
1681s(a) of the FCRA empowers the FTC "to require the filing of reports," and "the
production of documents" by commercial credit bureaus. That the FTC is closely
scrutinizing the activities of "private" credit bureaus is clearly established by the
12-page complaint issued by the FTC on February 21, 1974, against Retail Credit
Company. Retail Credit Co., No. 8954 (F.T.C., Feb. 21, 1974).
A pervasive scheme of state involvement in the operations of commercial credit
bureaus is apparent in statutes regulating this industry in California, Connecticut,
and New York. See CAL. Civ. CODE ANN. §§ 1785.1-.8 (West Supp. 1974); CONN.
GEN. STAT. §§ 36-431-35 (Supp. 1974-75); N.Y. GEN. Bus. LAW §§ 370-76
(McKinney Supp. 1974). The purpose of the New York statute is
to enable persons to protect themselves against the dissemination of inaccu-
rate information bearing on their credit worthiness and against unwarranted
invasions of their privacy.
N.Y. GEN. Bus. LAW § 370 (McKinney Supp. 1974).
In order to effectuate this purpose, the New York legislature has fashioned a broad
regulatory scheme which includes both civil and criminal penalties. N.Y. GEN. Bus.
LAW § 376 (McKinney Supp. 1974). In addition, it has delegated to the "banking
board" broad supervisory power to ensure compliance with the act. N.Y. GEN. Bus.
LAW § 375 (McKinney Supp. 1974).
The banking board may prescribe such regulations as it shall deem neces-
sary or proper to carry out the purpose of this article and may establish an
advisory committee . . . in connection therewith.
Id.
Similarly, the Connecticut state legislature, in passing the Consumer Credit
Reports Act, delegated to the bank commissioner the authority to "make such
regulations as may be necessary to carry out the the provisions" of this act. CONN.
GEN. STAT. § 36-434 (Supp. 1974-75). For the powers delegated to the Bank Com-
mission see id. §§ 36-10-22 (1969), as amended, Id. §§ 36-11, -12a, -15a (Supp.
1974-75).
The regulatory schemes expressed in the aforementioned state statutes are en-
forced not only by state regulatory agencies but also by the state's power to suspend
or revoke the corporate charter. The pervasiveness of these schemes, as well as the
broad powers delegated to state agencies to ensure compliance with the statutes,
are strong indicators that the state regards the credit reporting industry to be of
significant public importance.
when private individuals or groups are endowed by the State with

powers or functions governmental in nature, they become agencies or
instrumentalities of the State and subject to its constitutional limita-
tions."'
Alternatively, it has been stated:
Conduct that is formally "private" may become so entwined with
governmental policies or so impregnated with a governmental charac-
ter as to become subject to the constitutional limitations placed upon
state action. 2
Thus, as has previously been indicated, a state may not permit "a
corporation to govern a community of citizens so as to restrict their
fundamental liberties .... '" Nor may private groups to whom
the state delegates an aspect of the electoral process avoid strict
compliance with constitutional guarantees and limitations.2 2 '
As the Supreme Court reasoned in Burton v. Wilmington Parking
Authority,2 2' when state regulation of a "private" enterprise is suffi-
ciently close, the conduct of the regulated organization is subject to
the fourteenth amendment, because "to some significant extent the
State in any of its manifestations has been found to have been
involved in it. ' 126 State action is also triggered where the nexus
between the private organization and the state is viewed as creating
a state duty to prevent the private organization from violating con-
stitutional rights.2 7 Regardless of how the matter is stated, the re-
sult is the same: the private organization must comply with consti-
tutional guarantees.
The theory of governmental action through government regula-
tion is particularly compelling where provision is made for review
by the government of "private" conduct alleged to be unconstitu-
tional. 22 8 This was the case in Public Utilities Commission v.
221. Evans v. Newton, 382 U.S. 296, 299 (1966) (where park had a tradition of
municipal control and maintenance, and services rendered by the park were
municipal in nature, the park was subject to the equal protection requirements of
the fourteenth amendment).
222. Id.
223. Marsh v. Alabama, 326 U.S. 501, 509 (1946).
224. Terry v. Adams, 345 U.S. 461 (1953) (deprivation of petitioner's right to
vote by a private, white political association in combination with the Democratic
Party violated the fifteenth amendment).
225. 365 U.S. 715 (1961).
226. Id. at 722.
227. Id. at 725.
228. In terms of governmental regulation of the credit reporting industry by
Pollak229 which involved alleged violations of the first and fifth

amendments by a private transit company regulated by an agency
created and authorized by Congress.23 The Supreme Court in Pollak
relied on several factors to find a sufficient relation between the
federal government and the operations of the private transit com-
pany in order to subject the company to constitutional require-
ments. After noting the substantial monopoly enjoyed by the com-
pany, the Court placed primary emphasis on the following two ele-
ments:
We do, however, recognize that Capital Transit operates its service
under the regulatory supervison of the Public Utilities Commission
of the District of Columbia which is an agency authorized by Con-
gress. We rely particularly upon the fact that that agency, pursuant
to protests. . . ordered an investigation. . . and, after formal public
hearings, ordered its investigation dismissed on the ground that the
public safety, comfort and convenience were not impaired thereby."'
Commercial credit bureaus are private organizations which per-
form their services under the regulatory supervison of the Federal
Trade Commission as well as several other agencies created by Con-
gress."' By the terms of section 1681s(a) of the FCRA, the Federal
agencies created by Congress [see 15 U.S.C. § 1681s(b) (1970)], this factor should
be relevant not only to establish governmental action for purposes of the fifth
amendment, as well as under a broad reading of the fourteenth amendment, but
also to determine whether credit bureaus have achieved the status of "federal
agents" necessary for liability under Bivens. See notes 175-76 & accompanying
text supra.
229. 343 U.S. 451 (1952).
230. The agency in question was the Public Utilities Commission of the District
of Columbia. In discussing the governmental nature of this agency, Mr. Justice
Burton, writing for the Court, observed:
"[W]hen authority derives in part from Government's thumb on the
scales, the exercise of that power by private persons becomes closely akin, in
some respects, to its exercise by Government itself."
Id. at 462 n.8, quoting American Communications Ass'n v. Douds, 339 U.S. 392,
401 (1950).
231. 343 U.S. at 462.
232. According to the National Commission on Consumer Finance,
in the long run, the credit reporting industry has the ingredients of a public
utility. . . . Although the development of credit reporting agencies as public
utilities is not imminent, the Commission recommends that studies be un-
dertaken now to consider the eventual Federal charteringand regulationof
credit reportingagencies, both to assure the accuracy and confidentiality of
their credit information and to achieve open and economical access to their
data.
Trade Commission has "procedural, investigative, and enforcement

powers, including the power to issue procedural rules" to ensure
compliance with the Act. Section 1681s(b) enumerates the other
federal administrative bodies whose responsibility it is to ensure
compliance with the requirements imposed by the FCRA. These
administrative bodies include the Comptroller of the Currency, the
Federal Reserve Board, the Federal Deposit Insurance Corporation,
the Federal Savings and Loan Insurance Corporation, the National
Credit Union Administration, the Interstate Commerce Commis-
sion, the Civil Aeronautics Board, and the Secretary of Agricul-
2 33
ture.
Drawing from the analysis utilized by the Court in Pollak to es-
tablish sufficient governmental involvement in the operations of
Capital Transit to warrant invoking the first and fifth amendments,
it is not necessary to rely on the public utility status of commercial
credit bureaus to establish governmental action on the part of the
credit reporting industry. Nor is it necessary to rely on the fact that
Retail Credit Company, for example, "enjoys a substantial monop-
oly" 234 in the insurance reporting market, and perhaps in the non-
local credit reporting market as well. 235 What is significant in deter-
mining whether sufficient government involvement is present in the
industry to establish governmental action is the fact that credit
bureaus operate under the regulatory supervision of several agencies
"authorized by Congress, 2 36 just as Capital Transit in Pollak oper-
ated under the regulatory supervison of a single agency "authorized
by Congress. 2 31 Primary reliance, however, should be placed on the
fact that the FTC has obviously investigated various commercial
credit bureaus, precisely as the Public Utilities Commission sought
to do regarding Capital Transit in Pollak.231 For these reasons, the
NAT'L COMM'N ON CONSUMER FINANCE, REPORT ON CONSUMER CREDIT IN THE UNITED

STATES 213 (1971), quoted in Hearings on S. 2360, supra note 1, at 380.
233. 15 U.S.C. § 1681s(b) (1970).
234. 343 U.S. at 462.
235. See Credit Bureau Reports, Inc. v. Retail Credit Corp., 476 F.2d 989 (5th
Cir. 1973). The court found that Retail Credit had violated the antitrust laws by
monopolizing the insurance reporting market and by attempting to monopolize the
non-local credit reporting market. An injunction enjoining Retail Credit from con-
tinuing these practices was issued.
236. 343 U.S. at 462.
237. Id.
238. The results of one FTC investigation of commercial credit bureaus have
culminated in a formal complaint by the FTC against the Retail Credit Company.
See note 220 supra. The fact that the Public Utility Commission in Pollak aban-
operations of commercial credit bureaus have "become so entwined

with governmental policies or so impregnated with a governmental
character as to become subject to the constitutional limitations
placed upon [governmental] action."s
The same result should be reached even though the regulatory
agency has never reviewed the allegedly unconstitutional practice.
It would seem reasonable that, where constitutional rights are alleg-
edly impaired, a state's obliviousness to the problem should not
warrant a different result. In Burton v. Wilmington Parking
Authority,24 0 where the issue focused on the Authority's failure to
require its lessee to provide equal service to blacks, the Supreme
Court stated that
no State may effectively abdicate its responsibilities by either ignor-
ing them4 or by merely failing to discharge them, whatever the motive
2 1
may be.
H. Liability of Commercial CreditBureaus Under the Civil Rights

Act
Section 1983,212 derived from the Civil Rights Act of 1871, was
doned its investigation of Capital Transit [343 U.S. at 462], whereas the FTC is
continuing its investigation of the credit reporting industry on several fronts, does
not reduce the level of government involvement in the conduct and operation of
commercial credit bureaus below that level of government involvement which the
Supreme Court found in Pollak. Indeed, the continuing nature of the FTC investi-
gations of commercial credit bureaus should establish an even higher level of gov-
ernment involvement in the affairs of a quasi-public enterprise than the Court
found in Pollak.
239. Evans v. Newton, 382 U.S. 296, 299 (1966). Though Pollak involved regula-
tion of a private corporation performing a public function under the regulation of
an agency created by Congress, the Court's rationale for finding sufficient federal
involvement to require application of the first and fifth amendments should simi-
larly apply with respect to the fourteenth amendment in the case of credit bureaus
that are also regulated by agencies created by the state. See state statutes and
agencies created pursuant thereto in note 220 supra.
240. 365 U.S. 715 (1961).
241. Id. at 725. Other cases which have found general supervision of an organiza-
tion's activities by state agencies to be a significant factor in determining whether
state action exists include Eaton v. Grubbs, 329 F.2d 710 (4th Cir. 1964); Pennsyl-
vania v. Brown, 270 F. Supp. 782 (E.D. Pa. 1967), aff'd, 392 F.2d 120 (3d Cir.),
cert. denied, 391 U.S. 921 (1968). In Smith v. Allwright, 321 U.S. 649 (1944), the
Court also placed considerable reliance on comprehensive regulation and supervi-
sion in its finding of state action.
242. Section 1983 provides:
Every person who, under color of any statute, ordinance, regulation, cus-
enacted to protect individuals against invasion of federally-insured

rights through the misuse or abuse of power derived from the
state.24 Mr. Justice Douglas, writing for the Court in Monroe v.
Pape,244 traced the history of this statute and found that one purpose
of the Act "was to provide a federal remedy where the state remedy,
though adequate in theory, was not available in practice.12 45 Re-
viewing the congressional debates prior to the passage of the Civil
Rights Act of 1871,26 the Court quoted Senator Thurman of Ohio:
It [the Act] authorizes any person who is deprived of any right,
privilege or immunity secured to him by the Constitution of the
United States, to bring an action against the wrong-doer in the Fed-
tom, or usage, of any State or Territory, subjects, or causes to be subjected,
any citizen of the United States or other person within the jurisdiction
thereof to the deprivation of any rights, privileges, or immunities secured by
the Constitution and laws, shall be liable to the party injured in an action
at law, suit in equity, or other proper proceeding for redress.
42 U.S.C. § 1983 (1970).
243. In Mitchum v. Foster, 407 U.S. 225 (1972), the Supreme Court held that
section 1983 constituted an "expressly authorized" exception to the federal anti-
injunction statute, 28 U.S.C. § 2283 (1970). Justice Stewart, writing for the major-
ity, stated:
Section 1983 was originally § 1 of the Civil Rights Act of 1871 .... It was
"modeled" on § 2 of the Civil Rights Act of 1866.... and was enacted for
the express purpose of "enforc[ing] the provisions of the Fourteenth
Amendment.". . . As a result of the. . .Fourteenth Amendment, the role
of the Federal Government as a guarantor of basic federal rights against state
power was clearly established. . . .Section 1983 opened the federal courts
to private citizens, offering a uniquely federal remedy against incursions
under the claimed authority of state law upon rights secured by the Constitu-
tion and laws of the Nation.
It is clear . . . that [section 1983] was intended to enforce the provisions
of the Fourteenth Amendment "against state action . ...
407 U.S. at 238-240 (footnotes omitted).
244. 365 U.S. 167 (1961). In Monroe, petitioners brought an action under the
precursor of section 1983 against 13 Chicago police officers and the City of Chicago
for violation of their rights under the fourteenth amendment. Petitioners alleged
that the police officers, acting under color of state and local law, broke into peti-
tioner's home without any search or arrest warrant; ransacked every room; took one
of them to the police station where he was detained for several hours and interro-
gated without being taken before a magistrate; prohibited him from calling an
attorney; and subsequently released him without pressing any criminal charges
against him. The Court held that the complaint stated a cause of action against
the police officers, but not against the City of Chicago.
245. 365 U.S. at 174.
246. The predecessor of section 1983 originally appeared as section one of the
Civil Rights Act of 1871. 365 U.S. at 171.
eral Courts, and that without any limit whatsoever as to the amount
in controversy. The deprivation may be of the slightest conceivable
character, the damages in the estimation of any sensible man may
not be five dollars or five cents; they may be what lawyers call merely
nominal damages; and yet by this section jurisdiction of that civil
action is given to the Federal Courts instead of being prosecuted as
4
now in the courts of the States.27
After its examination of the legislative history underlying the Act,
the Supreme Court stated that
it is abundantly clear that one reason the legislation was passed was
to afford a federal right in federal courts because, by reason of preju-
dice, passion, neglect, intolerance or otherwise, state laws might not
be enforced and the claims of citizens to the enjoyment of rights,
privileges, and immunities guaranteed by the Fourteenth Amend-
ment might be denied by the state agencies. 248
The Monroe Court went on to consider the meaning of the phrase
"under color of" state law as used in the Act.2 41 The Court
reaf-
firmed the meaning given to this phrase by Mr. Justice (later Chief
Justice) Stone in United States v. Classic:
"Misuse of power, possessed by virtue of state law and made possi-
ble only because the wrongdoer is clothed with the authority of state
law, is action taken 'under color of state law." 5 '
To illustrate the application of section 1983 to commercial credit
bureaus, reference may be made to the New York Credit Data Re-
porting Act,?" under which commercial credit bureaus conducting
business in New York are regulated. The purpose of this Act is
to enable persons to protect themselves against the dissemination of
inaccurate information bearing on their credit worthiness and against
22
unwarranted invasions of their privacy.1
As already indicated, this purpose expresses a central theme of the
individual's constitutional right to informational privacy. Assuming
247. Id. at 179-80.

248. Id. at 180.
249. Id. at 181-87. It should be noted that the "under color of" law requirement
of section 1983 has consistently been treated as synonymous with the doctrine of
"state action." See United States v. Price, 383 U.S. 787, 794 (1966).
250. 365 U.S. at 184, quoting United States v. Classic, 313 U.S. 299, 326 (1941).
The meaning given to the words "under color of" state law in Classic was reaf-
firmed in Screws v. United States, 325 U.S. 91, 108-13 (1945).
251. N.Y. GEN. Bus. LAW §§ 370-76 (McKinney Supp. 1973-74).
252. Id. § 370.
that sufficient state involvement in the operations of commercial

credit bureaus was established for purposes of the state action doc-
trine of the fourteenth amendment, then credit bureaus would, in
effect, be state agents. In the event that the conduct of these "state
agents," "by reason of prejudice . . . neglect, intolerance or other-
wise"' 53 results in a denial of citizen's "rights. . .guaranteed by the
Fourteenth Amendment,"25 then a cause of action should lie against
these "agent-bureaus" under section 1983.
Traditionally, section 1983 has been strictly construed to provide
redress only in the situation where constitutional rights are deprived
by persons acting under color of state law.255 In the alternative, a
reasonable argument can be made for interpreting the word "state"
to mean "governmental entity." This would permit a broadening of
the scope of section 1983 to provide a remedy to those individuals
whose constitutional rights have been deprived by governmental
agents acting under color of both federal and state law. In light of
the reasoning expressed by the United States Court of Appeals for
the Second Circuit in Jackson v. Statler26 supporting similar consti-
tutional treatment of claims arising under the fifth and fourteenth
amendments, this appears to be a sound approach. Indeed, this very
proposition was expressly stated in 1970 by the United States Dis-
trict Court for the Eastern District of Wisconsin in Weise v.
1
Reisner:
Generally speaking, § 1983 protects constitutional rights from inva-
sion by persons acting under state or federal authority ....258
Although this is a minority position, it is clearly justified on the
ground that the primary thrust of both the fifth and fourteenth
253. 365 U.S. at 180.
254. Id.
255. See, e.g., United States v. Price, 383 U.S. 787 (1966); Monroe v. Pape, 365
U.S. 167 (1961); Screws v. United States, 325 U.S. 91 (1945); United States v.
Classic, 313 U.S. 299 (1941).
256. 496 F.2d 623, 635 (2d Cir.), cert. denied, 411 U.S. 932 (1974).
257. 318 F. Supp. 580 (E.D. Wis. 1970). In Weise the court rejected allegations
that defendants had conspired to deprive plaintiffs of their constitutional rights in
seeking a court-ordered examination into plaintiffs' mental condition. The court
refused to impose liability under section 1983 absent a showing that defendants
were state officials or were jointly engaged with state officials in their prohibited
action.
258. Id. at 581.
amendments is to prevent all governmental organizations from vio-

lating an individual's constitutional rights.
CONCLUSION
That commercial credit bureaus indulge in conduct which in-
trudes into an individual's privacy has been clearly demonstrated. 59
The existence of unreasonably high production goals, quotas for
adverse information, and the use of indirect methods of investiga-
tion involving subterfuge all contribute to this result. Common law
remedies have been unsuccessful in protecting the individual's right
to privacy because a qualified privilege has been accorded to credit
bureaus. Legislative attempts to control the conduct of the credit
reporting industry and to guarantee the individual's right to privacy
have also met with little success. This is not surprising in view of
the fact that the Fair Credit Reporting Act contains no real limita-
tion on the kinds of information which credit bureaus may gather,
store, and disseminate. The Act's inadequacy is further com-
pounded by the burden it places on the consumer to establish a
violation of the right to privacy, as well as its failure to provide the
consumer with a right to obtain full disclosure of all information
contained in his or her file.
The situation which exists in the credit reporting industry is indi-
cative of the
increasing complexity of our society and technological advances
which facilitate massive accumulation and ready regurgitation of far-
flung data. . . . These developments emphasize a pressing need to
preserve and to redefine aspects of the right to privacy to insure the
basic freedoms guaranteed by this democracy. 8 '
In order to provide individuals with an alternative means to protect
their right to privacy and to suggest possible foundations upon
which more adequate legislation may be drafted, this comment has
sought to illustrate the constitutional basis of the right to informa-
tional privacy in the context of credit reporting and to propose alter-
259. See notes 30-58 accompanying text, supra, regarding the practices and
procedures of Retail Credit Corporation. See also Peller v. Retail Credit Corp., 359
F. Supp. 235 (N.D. Ga. 1973); Wilson v. Retail Credit Corp., 325 F. Supp. 460 (S.D.
Miss. 1971), aff'd, 457 F.2d 1406 (4th Cir. 1972); Peacock v. Retail Credit Corp.,
302 F. Supp. 418 (N.D. Ga. 1969), aff'd, 429 F.2d 31 (5th Cir. 1970).
260. Menard v. Mitchell, 328 F. Supp. 718, 725 (D.D.C. 1971), modified, 498
F.2d 1017 (D.C.Cir. 1974).
1975] COMMERCIAL CREDIT BUREAUS 489
native theories of state action under which commercial credit bur-

eaus would be bound by constitutional guarantees.
RICHARD H. GOLDSTEIN
MARK S. BRODIE*
* Mr. Brodie, while a second-year student at the Washington College of Law,

worked as a part-time investigator for the Retail Credit Company of Atlanta,
Georgia, and undertook the research and writing of the section of this comment
entitled Practices and Procedures. As a result of his experiences, the authors were
able to compile firsthand information on the daily operations of the nation's largest
credit reporting agency.

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reau investigators are subjected to intense pressure by their respec-

reporting7 which must of necessity seriously impair the accuracy

changes.' 0 Insurance credit ratings also normally contain informa-

10. Hearings on S. 823, supra note 9, at 91.

quota systems or at least incentive plans requiring investigators to

bureaus within the ambit of the fifth and fourteenth amendments. 21

I. PRACTICES AND PROCEDURES

destruction is completed on anything more than a random basis.

In hearings on credit company practice, the RCC president noted:

the insurance salesperson returns to the office with the insurance

In an eight-hour day, part of which is spent in the office, the RCC

include heavy drinkers, sexual deviates, children out of wedlock,

B. Training the Investigators

affecting its observance should be kept in mind during the following

roadmap to "plot" the cases. The new investigator must be made

no neighbors are contacted and no former employers are available

This process takes several hours, depending on the volume of reports

52. See id. at 8 (statement of Mark S. Brodie).

mitted to perform its contracts in this fashion. And, of course, the

of information about individuals, assemble this information into

1-. THE FAIR CREDIT REPORTING AcT

58. Id. at 59, where Burge states:

The credit reporting agencies succeeded in selling Congress the

quest. 15 U.S.C. § 1681(a)(1) (1970). Thus, it is conceivable that an investigative

The credit reporting agencies succeeded in selling Congress the monstrous

complete absence of any attempt to restrict the collection and dis-

67. 15 U.S.C. § 1681d (1970). This section is entitled "Disclosure of Investigative

The failure of the FCRA to provide for adequate disclosure to the

On the basis of these precedents, serious constitutional questions

I1. THE FUNDAMENTAL RIGHT TO INFORMATIONAL PRIVACY

this unfortunate result is that credit reporting agencies are accorded

thereafter, an agent of the employer informed the plaintiff "that he

87. Id. at 1236.

sumer report" within the scope of the FCRA. Consequently, by

B. The Right to Privacy

90. 359 F. Supp. at 1237.

combat business practices which cause invasions of privacy because

mental in the constitutional sense. Faced with the issue of whether

96. Id. at 33-34.

state criminal laws permitting abortions only as a life-saving proce-

The Court went on to state that the right of privacy is either

flung" data on private individuals. In light of these circumstances,

An examination of the personal damage that may result from the

in Shelton v. Tucker 3 and NAACP v. Alabama."' In Shelton, the

C. The Need for a Right to InformationalPrivacy

changes which have recently occurred in the ability to gather, re-

to privacy in the light of modern-day information systems. Judge

For these reasons, the right to informational privacy should be re-

records pertaining to these taxpayers to examination by government agents. The

The fourth amendment's prohibition against unreasonable search

of arrest frequently are amended to show an ultimate non-criminal disposi-

the United States Court of Appeals for the District of Columbia

Second is freedom of choice in the basic decisions of one's life respecting