District Court rules FCRA waives sovereign immunity

Courts FCRA State Issues Department of Education Student Lending

On May 13, the U.S. District Court for the Eastern District of Michigan denied a motion to dismiss filed by the Department of Education (Department), ruling that the FCRA “unequivocally waives sovereign immunity” concerning the allegations at issue in the case. In the lawsuit, the plaintiff alleges, among other things, that the Department violated Section 1681s-2(b) of the FCRA by “negligently and willfully” failing to conduct a proper investigation of her dispute and by failing to remove an erroneous notation of “account in dispute” from a tradeline reported on her credit files. The Department moved to dismiss, arguing, among other things, that it could not be sued for damages under the FCRA “because Congress has not waived sovereign immunity with respect to that statute.”

The court, disagreed, pointing out that while the question of whether sovereign immunity is waived under the FCRA “has generated a circuit split,” the “authority finding that the FCRA waives sovereign immunity is more persuasive than the authority supporting the contrary view.” After examining the statute, the court noted that the FCRA defines a “person” to include a “government or governmental subdivision or agency,” and pointed out that the term “person” appears in other FCRA provisions cited within the plaintiff’s lawsuit. As an example, the court referenced Section 1681n(a), which states: “Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer.” The court also determined that the waiver of sovereign immunity “is sufficiently explicit” in Section 1681u of the FCRA.