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Financial Services Law Insights and Observations

9th Circuit holds inclusion of state disclosure requirements violate FCRA standalone requirement

Courts FCRA Ninth Circuit Appellate Disclosures State Issues


On January 29, the U.S. Court of Appeals for the 9th Circuit held that the defendant employer violated the Fair Credit Reporting Act’s (FCRA) standalone document requirement when it included extraneous state disclosure requirements within a disclosure to obtain a consumer report on the plaintiff, a prospective employee. The panel also concluded that the defendant’s form failed to satisfy both the FCRA and the California Investigative Consumer Reporting Agencies Act’s (ICRAA) “‘clear and conspicuous’ requirements because, although the disclosure was conspicuous, it was not clear.” According to the opinion, the plaintiff signed a “Disclosure Regarding Background Investigation,” and was employed for several months before voluntarily terminating her employment. Following her departure from the company, the plaintiff filed a putative class action against the defendant, alleging a failure to make proper disclosure under the FCRA and the ICRAA. The plaintiff claimed that the disclosure form included not only a disclosure as required by the FCRA stating that the defendant could obtain a consumer report on her, but also additional disclosure requirements for several other states.

The district court initially granted the defendant’s motion for summary judgment as to the FCRA and as to ICRAA’s clear and conspicuous requirement, holding that the disclosure form complied with both statutes. On appeal, the 9th Circuit first rejected the plaintiff’s assertion that the disclosure form violated the standalone document requirements because it included all the application materials she filled out during the employment process. The panel declined to extend this principle to the FCRA’s definition of a “document,” stating that the employment packet was distinct from the disclosure form. However, the 9th Circuit cited to its 2017 decision in Syed v. M-I, LLC, which held that “‘a prospective employer violates Section 1681b(b)(2)(A) when it procures a job applicant’s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure.’” Noting the statute’s plain language, the 9th Circuit concluded in Syed that the FCRA meant what it said—“the required disclosure must be in a document that ‘consist[s] ‘solely’ of the disclosure.’” Moreover, the panel stated that Syed considered the standalone requirement with regard to any surplusage, and that the “FCRA should not be read to have implied exceptions, especially when the exception—in that case, a liability waiver—was contrary to FCRA’s purpose.”

The 9th Circuit also concluded that the district court erred in holding that the disclosure form was clear because the form (i) contained language a reasonable person would not understand, and (ii) the language combined federal and state disclosures, which would confuse a reasonable reader. However, the panel held that the disclosure form met the conspicuous requirement since the defendant capitalized, bolded, and underlined the headings for each section of the disclosure and labeled the form so an applicant could see what she was signing. Accordingly, the 9th Circuit affirmed in part and vacated in part the district court’s decision, and remanded the case for further proceedings.

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