The case law surrounding the Fair Credit Reporting Act (FCRA) is ever-changing, and staying up to date on certain, key statutory definitions is a core compliance task for any company subject to the FCRA.
The FCRA is a frequent driver of litigation, so courts have had numerous opportunities to weigh in on many of the unanswered questions that remain in litigation almost 50 years since the statute was first enacted, including lingering questions about statutory definitions. Here, we highlight 10 key FCRA cases and developments in 2019 and early 2020.
FCRA Definition of a Consumer Reporting Agency
The FCRA defines a consumer reporting agency (CRA) as (1) “any person which … regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers” and (2) “for the purpose of furnishing consumer reports to third parties.” In 2019, three significant decisions clarified this definition and the scope of liability for CRAs versus users or furnishers.
1. Kidd v. Thomson Reuters[1]
On May 30, 2019, the Second Circuit considered the specific question of “[w]hether, to qualify as a ‘consumer reporting agency’ under the FCRA, an entity must specifically intend to furnish a ‘consumer report.’” In affirming the district court’s decision, the Second Circuit found that to determine an entity’s intent, a court must consider “the totality of a defendant’s actions.”
Here, the plaintiff applied for a position with the Georgia State Department of Public Health, which then conducted a background check on the plaintiff using Thomson Reuters’s research platform, Consolidated Lead Evaluation and Reporting (CLEAR). CLEAR is primarily used to grant government agencies access to public records for investigative purposes, but the product includes numerous prohibitions and warnings that it is not to be used for impermissible purposes under the FCRA.
The plaintiff sued Thomson Reuters, arguing that Thomson Reuters was acting as a CRA, and thereby subject to the FCRA, which it then violated by including inaccurate information on the background report. The Second Circuit, in affirming summary judgment on behalf of Thomson Reuters, found “that because it is undisputed that Thomson Reuters took numerous — and effective — measures to prevent CLEAR reports from being utilized as ‘consumer reports,’ no reasonable juror could conclude that Thomson Reuters intended to furnish such reports, and therefore it is not a ‘consumer reporting agency’ under the FCRA.”
2. Zabriskie v. Federal National Mortgage Association[2]
On January 9, 2019, the Ninth Circuit addressed whether the Federal National Mortgage Association (Fannie Mae) was a CRA, and thereby could be held liable under the FCRA for violations of 15 U.S.C § 1681e(b), which requires a consumer reporting agency to follow “reasonable procedures to assure maximum possible accuracy” of consumer information.
The Ninth Circuit, in reversing the district court held that Fannie Mae was not a CRA because, “even if it assembles or evaluates consumer information,” it does not do so to furnish that information to third parties.[3] Rather, the Ninth Circuit found that Fannie Mae offered tools to mortgage lenders so that they could evaluate mortgage loan applicants only “to determine a loan’s eligibility for subsequent purchase.”[4]
3. Frazier v. First Advantage Background Services[5]
On September 23, 2019, the U.S. District Court for the Eastern District of Virginia dismissed a putative class action against First Advantage Background Services Corporation (FADV) based on alleged violations of the FCRA. The decision marked a clear distinction between CRAs and the users of their reports in the hiring context, where a CRA applied employer-provided hiring criteria to background screenings for prospective employees.
The plaintiffs alleged that FADV, a CRA, violated 15 U.S.C. § 1681b(b)(3)(A) by failing to provide a copy of the consumer reports and FCRA summaries of rights to the plaintiffs before taking an adverse employment action — the adverse action being the application of the eligibility score to the report before providing it to the employer.
The court found that “the allegations in the Second Amended Complaint do not demonstrate that First Advantage acted beyond its role as a CRA when it marked Plaintiffs as ineligible,” and thus held that the plaintiffs failed to state a claim for a violation of § 1681b(b)(3). Rather, the court found that only the employer who was actually making the decision could be held liable under § 1681b(b)(3).
Because the employer had defined the eligibility criteria for FADV, even though FADV marked the candidates as ineligible on the report, the employer was ultimately responsible for the hiring determination. And under the FCRA, only “the person intending to take such adverse action” must provide the requisite notice to the applicant.
No Liability for Furnishing Accurate Reports
This past year featured a couple of significant decisions providing clarity that CRAs could not be held liable for providing accurate information on consumer reports.
4. Humphrey v. Trans Union[6]
On January 8, 2019, the Seventh Circuit affirmed judgment in favor of the national consumer reporting agencies, rejecting a plaintiff’s attempt to impose FCRA liability upon the CRAs for reporting information the furnisher had verified as accurate. The Humphrey decision represents a significant victory for CRAs facing collateral attacks of the accuracy of the accounts they report.
In Humphrey, the plaintiff submitted multiple disputes with the CRAs, who then sent the furnisher Automated Credit Dispute Verifications. Each time, the furnisher confirmed to the CRAs that the information reported was accurate. The Seventh Circuit rejected the plaintiff’s argument that the CRAs could face liability under the FCRA by continuing to report the debt even though the plaintiff claimed...
