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  • 5th Circuit affirms summary judgment in FCRA case

    Courts

    On April 22, the U.S. Court of Appeals for the Fifth Circuit affirmed a district court’s dismissal of an FCRA action, holding that the plaintiff failed to prove that his alleged injuries were the result of the defendants’ actions. According to the opinion, the plaintiff alleged that a financial institution wrongfully reported a payment delinquency on his retail credit card, which he claimed caused the subsequent denial of a loan application. Upon learning of the denial, the plaintiff disputed the late-payment notation with three credit reporting agencies (CRAs). Prior to the district court’s judgment, the plaintiff settled with the retailer, the financial institution, and one of the three CRAs. The remaining two defendant CRAs reinvestigated the delinquency with the financial institution, confirmed the information, and notified the plaintiff of the result of their investigation. The plaintiff argued that the CRAs “failed to conduct a reasonable investigation” because they never directly contacted the retailer about the disputed late payment. However, the district court held that that the CRAs’ reliance on the Automated Consumer Dispute Verification (ACDV) system to investigate the dispute and confirm the information was “generally acceptable.”

    On appeal, the 5th Circuit agreed with the district court that the plaintiff “offered no reasonable factual basis” for why the CRAs “should have been on notice of a need to go beyond the ACDV system as to this dispute.” The appellate court further agreed that the plaintiff was unable to show that contacting the retailer would have changed the CRAs’ conclusions about the information they already possessed. Finally, the 5th Circuit held that the plaintiff had shown no evidence that the denial of his loan application was a direct result of the CRAs’ actions because, as the district court concluded, the loan application was denied because of a credit report from the CRA that had previously settled with the plaintiff and was no longer a party to the suit.

    Courts Appellate Fifth Circuit FCRA Fair Credit Reporting Act Credit Reporting Agency

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  • CFPB plans credit reporting supervisory flexibility during Covid-19 pandemic, contingent on accurate reporting

    Federal Issues

    On April 1, the CFPB issued a policy statement directed at consumer reporting agencies (CRAs) and furnishers. Taking into consideration the Covid-19 pandemic, the statement explains that the Bureau will take a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the Fair Credit Reporting Act [(FCRA)] and Regulation V.” The Bureau states that it will be flexible with CRAs and furnishers by refraining from taking enforcement actions and citing during exams in certain situations. Two examples of when the Bureau will be flexible include: (i) furnishers that continue to furnish accurate data to CRAs, including regarding payment relief arrangements (the Bureau notes that the CARES Act obliges furnishers to report consumer accounts as current when furnishers grant payment accommodations requested by consumers impacted by Covid-19); and (ii) CRAs and furnishers that make good faith efforts to investigate consumer disputes but take longer than the FCRA-prescribed 30 days. The statement notes that “the continued operation of the consumer reporting system…will enable consumers, as well as lenders, insurers, employers and other consumer report users, to maintain confidence in the consumer reporting system.”

    Federal Issues CFPB Credit Furnishing Fair Credit Reporting Act FCRA Credit Reporting Agency CRA CARES Act Covid-19

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  • Senate Banking Committee seeks data privacy feedback

    Privacy, Cyber Risk & Data Security

    On February 13, Senate Committee on Banking, Housing, and Urban Affairs Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) invited stakeholder feedback on “the collection, use and protection of sensitive information from financial regulators and private companies” as a means of informing potential future legislation. In a press release issued by the committee, Crapo noted, “Given the exponential growth and use of data, and corresponding data breaches, it is worth examining how the Fair Credit Reporting Act should work in a digital economy, and whether certain data brokers and other firms serve a function similar to the original consumer reporting agencies.” He further stressed the importance of understanding how consumer data is compiled and protected, and how consumers are able to access and correct sensitive information. The release sought answers to five questions designed to help examine ways in which legislation, regulation, or the implementation of best practices can (i) provide consumers better control over their financial data, as well as timely data breach notifications; (ii) ensure consumers receive disclosures concerning both the type of information being collected and its purpose for collection; (iii) provide consumers control over how their data is being used—including the sharing of information by third-parties; (iv) protect consumer data and ensure the accuracy of reported information in a consumer’s credit file; and (v) allow consumers the ability to “easily identify and exercise control of data that is being . . . collected and shared” as a determining factor when establishing whether a consumer is eligible for, among other things, credit or employment.

    Privacy/Cyber Risk & Data Security Senate Banking Committee Federal Legislation Consumer Protection Fair Credit Reporting Act

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  • Credit Reporting Agency Assessed Damages of $60 Million for FCRA Violations

    Courts

    On June 20, a federal jury found that a major international credit reporting agency had violated the Fair Credit Reporting Act (FCRA), awarding damages of $60 million. When performing credit checks, the agency allegedly had failed to distinguish law-abiding citizens from drug traffickers, terrorists, and other criminals with similar names found on the Treasury Department’s Office of Foreign Assets Control database, sometimes confusing plaintiffs with individuals on the watch list. The jury determined that the company (i) “willfully fail[ed] to follow reasonable procedures to assure the maximum possible accuracy of the OFAC information it associated with members of the class’’; (ii) “willfully failed to clearly and accurately disclose OFAC information in the written disclosures it sent to members of the class”; and (iii) “failed to provide class members a summary of their FCRA rights with each written disclosure made to them.” The class members were awarded just under the maximum for statutory damages, in addition to punitive damages of more than six times the statutory amount.

    Courts Fair Credit Reporting Act Department of Treasury OFAC

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