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Financial Services Law Insights and Observations

9th Circuit holds extraneous information violates FCRA standalone disclosure requirement

Courts Appellate Ninth Circuit FCRA Credit Report Disclosures Consumer Finance


On March 20, the U.S. Court of Appeals for the Ninth Circuit partially reversed a district court’s dismissal of a Fair Credit Reporting Act (FCRA) action, concluding that a company’s disclosures contained “extraneous information” in violation of the FCRA’s standalone disclosure requirement. The plaintiff filed a putative class action lawsuit against his former employer (defendant) after his employment—which was contingent on passing a background check—was ultimately terminated based on the results of his credit report. According to the plaintiff, the defendant violated two sections of the FCRA: (i) that the disclosure form was not clear and conspicuous and was encumbered by extraneous information; and (ii) that the defendant failed to notify him in the pre-adverse action notice that he could discuss the consumer report directly with the defendant prior to his termination. The district court dismissed the allegations, concluding that the disclosure met the FCRA’s disclosure requirements because it was not overshadowed by extraneous information, and “that the FCRA does not require that pre-adverse action notices inform an employee how to contact and discuss a consumer report directly with the employer.”

On appeal, the 9th Circuit reversed the district court’s ruling on whether the signed disclosure form contained extraneous information, concluding that because the disclosure form also included information about plaintiff’s rights to obtain and inspect information gathered by the consumer reporting agency about the plaintiff, it went beyond the FCRA’s standalone disclosure requirement. Noting that the FRCA requires a standalone disclosure but does not define the term “disclosure,” the 9th Circuit stated that a company may “briefly describe what a ‘consumer report’ entails, how it will be ‘obtained,’ and for which type of ‘employment purposes’ it may be used.” Finding that the clear and conspicuous standard was established in a case decided after the district court had dismissed plaintiff’s case, the court remanded the case to the district court to determine whether the defendant’s disclosure form satisfied the clear and conspicuous standard. However, the appellate court affirmed the dismissal of the plaintiff’s other claim, agreeing with the district court that the FCRA only requires employers to provide “a description of the consumer’s right to dispute with a consumer reporting agency the completeness or accuracy of any item of information contained in the consumer’s file at the consumer reporting agency.”

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