When employers obtain a consumer report for employment purposes, §1681b(b)(3)(A) of the Fair Credit Reporting Act (the “FCRA”) requires issuance of a pre-adverse action notice to the subject of the report (the “consumer”) if the employer determines it may take an “adverse action” based in whole or in part on the information in the consumer report. The pre-adverse action notice must be sent before the adverse action is taken, and it must include a copy of the consumer report and a summary of the consumer’s rights under the FCRA. If the consumer does not timely dispute or appeal the information in the consumer report, it is common practice for an adverse action notice to be sent automatically to the consumer at the end of dispute period. It is possible; however, that following this procedure will result in an employer’s liability for statutory damages under the FCRA, even if the two-step process required by §1681b(b)(3)(A) was followed and the employment decision was proper.
A recent decision allowing such a class action to proceed presents this issue for a large employer. In Manuel v. Wells Fargo Bank, N.A., 3:14-cv-238 (E.D. Va.), a class has been certified consisting of a class of persons who were not provided a pre-adverse action notice at least five days before they were first coded as ineligible for hire. Thus, the initial decision that information in a consumer report may disqualify the consumer is being treated as the employer’s final decision, and, therefore, it is an “adverse action” taken before issuance of a pre-adverse action notice. This class was certified after the court denied Well Fargo’s motion for summary judgment on the ground that it is a factual question for a jury whether or not the act of coding a consumer as ineligible for employment before the pre-adverse action notice was sent is an “adverse action”.
Two earlier decisions highlight the opposing arguments on this issue. In Obabueki v. International Business Machines Corp., 145 F.Supp. 2d 371 (S.D.N.Y. 2001), plaintiff asserted that IBM had taken an “adverse action” by withdrawing a conditional offer of employment without first sending plaintiff the pre-adverse action information required by §1681b(b)(3)(A). The court granted defendant’s motion for summary judgment finding that “the statute expressly allows for the formation of an intent to take adverse action before complying with Section §1681b(b)(3) as it states that ‘the person intending to take’ adverse action must provide the report and description of rights. After all, how can an employer send an intent letter without having first formed the requisite intent?”[1]
A different result was reached in Goode v. LexisNexis Risk & Info. Analytics Group, Inc., 848 F.2d 552 (E.D. Pa. 2012), in...
