CFSL Bulletin The latest Consumer Financial Services Litigation news, developments, and legal thinking

Tag Archives: Fair Credit Reporting Act

Is Your Company Using the Right Form for Background Checks?

Posted in Consumer Financial Protection Bureau; Fair Credit Reporting Act

The Consumer Financial Protection Bureau (the “Bureau”) has taken over rulemaking and enforcement responsibilities for the Fair Credit Reporting Act (“FCRA”) and has updated an important FCRA form that employers must use when utilizing consumer reports in conducting background investigations of prospective and current employees. Employers must use the new form beginning in January.

The FCRA is a federal law that imposes a number of obligations on employers who use reports from consumer reporting agencies (“CRAs”) to conduct background screenings of potential and current employees. If an employer uses such reports as the basis of an adverse employment action, such as terminating or failing to hire an employee, without complying with the FCRA, the employer is subject to liability under the FCRA. 

The Bureau has updated the form entitled “A Summary of Your Rights Under the Fair Credit Reporting Act” (“Summary of Rights”) to indicate that it has primary responsibility for the FCRA. Previously, the Federal Trade Commission (“FTC”) had responsibility for the FCRA. On the new form – which employers must use – the Bureau encourages employees to visit its website for further information about their rights. 

An employer is required to provide the Summary of Rights to job applicants and current employees before it obtains an investigative consumer report (a report that contains information gathered through personal interviews with people who know the applicant or employee) from a consumer reporting agency. Employers are also required to provide the Summary of Rights with any pre-adverse action notice sent to an employee when the employer plans to rely on the information contained in the background report to make an employment-related decision. 

Employers must use the new form – and doing so provides them with the ability to raise a defense against a claim of improper disclosure under the FCRA.

By updating the Summary of Rights (as well as other forms used by CRAs), the Bureau has indicated that the FCRA is on its radar.  Employers should expect that the Bureau will use its enforcement powers to ensure employer compliance with the FCRA.

Be sure to use the right form!  The Bureau announced on November 14 that the forms it previously issued late last year for use by January 2013 contained typos and other errors. The Bureau recently reissued corrected forms, which can be found here. While the forms issued late last year are sufficient for the time being, the Bureau will discontinue use of those forms at some point in 2013, so it is important to make the switch to the proper form as soon as practicable.

The First Circuit Confirms FCRA Private Right of Action Against Furnishers of Credit Information

Posted in Fair Credit Reporting Act

Wen Chiang succeeded on the law but failed on the facts in his Fair Credit Reporting Act claim against Verizon. In Chiang v. Verizon New England Inc., Case No. 09-1214 (lst Cir., Feb. 9, 2010), Chiang claimed that Verizon failed to investigate adequately his disputes about the telephone bill payment information it furnished to the consumer reporting agencies (“CRA”). In this case of first impression for the lst Circuit, the Court concluded that the FCRA does provide a private right of action when a furnisher of credit information fails to conduct a reasonable investigation after a CRA notifies it that a consumer disputes information it provided. 15 U.S.C. § 1681s-2(b). In order to make out a case, a plaintiff must show:

  1. The furnisher received a dispute from a CRA;
  2. The furnisher’s investigation of the dispute was unreasonable; and
  3. There were actual inaccuracies that the furnisher could have discovered had it conducted a reasonable investigation.

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Class Action Lawsuit Over freecreditreport.com

Posted in Fair Credit Reporting Act

A Wisconsin college student has filed a seven count class action complaint against Experian for its freecreditreport.com ads. The Plaintiff alleges that she was in the midst of purchasing a new car and wanted to check her credit. She claims that in March 2008, she went to freecreditreport.com for a single (but free) credit report and did not see any disclaimers that the service came with a $14.95 per month credit monitoring service. After noticing the fee on her credit card statement months later, she went back to the website and found, in her words, “a poorly displayed disclaimer” of the monthly fee. She was able to cancel the service, but was not able to have her money refunded. She seeks to represent a class of consumers who signed up for a free credit report and were charged the monthly fee.

As noted before, the Government has been trying to crack down on the freecreditreport.com ads by making its own parodies.

United States Supreme Court Recongizes Rise In Consumer Credit Litigation

Posted in Fair Credit Reporting Act

Each year, Chief Justice John Roberts. Jr. issues a report about the state of the federal judiciary. For 2009, Justice Roberts reported a 6% year-to-year decline in filings in the Supreme Court and federal courts of appeals. The federal district courts saw a 3% increase in filings over 2008 filings, up to 276,397 filings in 2009. Particularly relevant to the consumer federal services industry (and this blog), Justice Roberts found that, in 2009:

Filings of cases involving consumer credit, such as those filed under the Fair Credit Reporting Act, increased 53% (up 2,143 cases), fueled in part by the current economic downturn, particularly in the nation’s most populous districts.

Justice Roberts concluded that “[t]he courts are operating soundly, and the nation’s dedicated federal judges are conscientiously discharging their duties.” You can read the entirety of his report here.

Ninth Circuit Issues Mixed Opinion On Credit Reporting Laws

Posted in Fair Credit Reporting Act

In Gorman v. Wolpoff & Abramson, LLP & MBNA America Bank N.A., No. 06-17226 (Oct. 21, 2009), the Ninth Circuit Court of Appeals issued a mixed opinion on claims of violations of the Fair Credit Reporting Act (“FCRA”) and a California statutory counterpart, and of common law libel.

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