A federal appeals court has ruled that a credit reporting agency can be held responsible for correcting errors on credit reports that originated from government watch lists.

In the case, Sandra Cortez sued TransUnion after it reported that her name had appeared on a watch list compiled by the Treasury Department’s Office of Foreign Assets Control (OFAC). The OFAC list collects names of individuals thought to be terrorists, international drug traffickers, and weapons of mass destruction proliferators. Cortez was erroneously listed on the OFAC report because her name was similar to that of a known Colombian drug dealer.

Cortez was denied a car loan because of the OFAC listing, which appeared on her TransUnion credit report. Over the course of the next year, Cortez attempted to correct the report through TransUnion and through the Treasury Department. When Cortez requested a copy of her credit report, the OFAC information was not listed. However, despite numerous calls and written requests, the OFAC information still appeared on the report given when Cortez tried to rent an apartment.

Cortez sued Trans Union under the Fair Credit Reporting Act alleging that the credit reporting agency was negligent in failing to correct her credit report. A jury found in favor of Cortez, concluding that TransUnion willfully failed to investigate the claims of an inaccurate report or note that the issue was under dispute. The jury awarded Cortez $50,000 in actual damages and $750,000 in punitive damages. TransUnion appealed the decision.

The U.S. District Court for the Eastern District of Pennsylvania upheld the jury verdict and the actual damages but reduced the punitive damages to $150,000.

TransUnion again appealed. The credit reporting agency argued that it only reported the OFAC information and should not be held responsible for its accuracy. The U.S. Court of Appeals for the Third Circuit disagreed, upholding the lower court’s verdict. The appellate court ruled that TransUnion was responsible for the accuracy of the OFAC information if the agency chose to list it on credit reports.

The court noted that the credit report did not say that Cortez was a “possible” match or had a name “similar” to someone on the OFAC list. Instead it reported a “match” with someone on the list. However, TransUnion’s records showed that Cortez was born in 1944 and her middle name was Jean. The person on the OFAC list was named Sandra Quintero Cortes and was born in 1971. Despite this information, TransUnion placed a notice on Cortez’s credit report stating “input name matches name on the OFAC database.”

The court was clear about TransUnion’s responsibility in the matter and noted that the OFAC information is no different from that received from creditors or public record and credit agencies. The court also said credit reporting agencies are responsible for ensuring that the information is correct.

In the written opinion of the case, the court noted that “Congress clearly intended to ensure that credit reporting agencies exercise care when deciding to associate information with a given consumer, and the record clearly supports the jury’s determination that TransUnion did not exercise sufficient care here.”