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Financial Services Law Insights and Observations


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  • Supreme Court agrees with Third Circuit that consumers may sue “any” government entity under FCRA


    On February 8, the Supreme Court of the United States unanimously decided that a consumer can sue any government agency—in this case the U.S. Department of Agriculture (USDA)—for damages for violating the Fair Credit Reporting Act of 1970, as amended by the Consumer Credit Reporting Reform Act of 1996 (the Act). The court found that government agencies are expressly included in the definition of any “person” who violates the statute.  On appeal from the 3rd Circuit, the case involved an individual who sued the USDA for monetary damages under FCRA, alleging that the USDA furnished incorrect information to a credit reporting company stating that his account was past due, damaging his credit score and impairing his ability to access affordable credit. 

    In affirming the 3rd Circuit’s reversal of the lower court’s dismissal of the case, the Supreme Court noted that, while the U.S. is “generally immune” from monetary judgment suits as a sovereign body, Congress can waive this immunity. Applying a “clear statement” rule, the Supreme Court interpreted the Act’s statutory language that authorizes consumer suits for money damages against “[a]ny person” who willfully or negligently fails to comply with [the law]” to constitute a clear waiver of federal government sovereign immunity. As the Court explained, “the Act defines the term ‘person’ to include “any . . . governmental . . . agency,” therefore “FCRA clearly waives sovereign immunity in cases like this one.” 

    Courts U.S. Supreme Court FCRA CCRA USDA Sovereign Immunity

  • District Court: Plaintiff has standing but still dismisses FCRA case


    On January 19, the U.S. District Court for the District of New Jersey granted a bank’s motion to dismiss an FCRA case. According to the opinion, after plaintiff’s credit report revealed monthly payments towards previously closed accounts with defendant, plaintiff alleged that because the accounts were closed, the entire balance was due and that she had neither the right nor the obligation to pay defendant in monthly installments. Plaintiff then disputed the debt with a credit reporting agency, which forwarded the dispute to defendant, but ultimately plaintiff’s credit report was never updated to $0 monthly payments as she requested. Three days later, plaintiff filed suit alleging defendant violated the FCRA by failing to investigate the dispute and failing to direct the credit reporting agency to report the tradelines with $0 monthly payments. Although plaintiff does not assert in her complaint that her credit reports have been distributed to any potential lender, plaintiff alleged that the tradelines listed in her credit report are inaccurate and “create a misleading impression of her consumer credit file.”

    In determining Article III standing, the court held that plaintiff sufficiently alleged injury in fact because defendant’s “false and misleading reporting to a credit bureau about Plaintiff’s obligation on a debt has a close relationship to reputational harms such as defamation and common law fraud.” The court acknowledged, however, that “[l]ower courts have split on the issue of whether dissemination of a defamatory statement to a credit reporting agency, as opposed to the potential creditors at issue.” On one hand, the U.S. Supreme Court found that class members whose misleading credit reports were not disseminated to a third party did not suffer concrete harm. In another case, the Seventh Circuit concluded that plaintiffs adequately proved third-party dissemination by presenting evidence that debt collectors reported false information about them to a credit reporting agency, dismissing any interpretation precedent that would demand the plaintiffs to additionally demonstrate that the third party shared the false information. The court agreed with the latter decision, citing that “dissemination to a credit reporting agency suffices to establish defamatory publication for standing purposes.”

    Although plaintiff established Article III standing, the court found that plaintiff failed to state a claim under the FCRA because she failed to allege that the tradelines issued by defendant contain inaccurate information. Furthermore, the court found that a report, as plaintiff requested, showing $0 monthly payments on the account would be more misleading, because it would purport that plaintiff does not owe a balance to defendant. 

    Courts FCRA New Jersey Litigation Debt Collection Credit Report

  • Massachusetts State Appeals Court orders a consumer has standing to sue in state court under the FCRA without federal standing


    On January 11, the Massachusetts Court of Appeals ordered that an employee has standing to sue in state court, despite lacking standing to sue in a federal court. The employee (plaintiff) sued a prospective employer for allegedly conducting a background check in a manner that violated the FCRA. The defendant successfully sought to have the case moved from state court to federal court. In federal court, the defendant was granted a motion to dismiss on the grounds that plaintiff lacked standing under Article III, which requires that the plaintiff allege a “concrete” injury. Ultimately, the case was remanded to state court, where the Superior Court dismissed the FCRA claims. The plaintiff appealed, and the appellate court ruled that the plaintiff had alleged facts sufficient to support standing to sue in state court, as the applicable standard did not require a showing of “concrete” harm. 

    Courts Massachusetts FCRA Appellate Standing

  • CFPB fines and shuts down debt collector for alleged FDCPA, FCRA violations

    Federal Issues

    On December 15, the CFPB announced a consent order against a Pennsylvania-based nonbank medical debt collection company for alleged violations of the FCRA and FDCPA. According to the order, the company failed to (i) establish and implement reasonable written policies and procedures for ensuring the accuracy and integrity of information furnished to consumer reporting agencies; (ii) conduct reasonable investigations into direct and indirect consumer disputes about furnished information; (iii) report direct dispute investigation results to consumers; and (iv) indicate disputed items when furnishing information to reporting agencies. The company also allegedly lacked a reasonable basis for debt-related representations made to consumers and engaged in collection activities after receiving a written dispute within 30 days of the consumer’s receipt of a debt validation notice but before obtaining and mailing a verification of the debt.

    The consent order permanently bans the company from involvement or aid in debt collection, purchasing or selling of any debts, or any consumer reporting activities. The company must also request credit reporting agencies to delete all collection accounts previously reported by the company. Additionally, the company is obligated to pay a $95,000 civil money penalty and must display on its website information that informs consumers about the option to file a complaint with the CFPB.

    Federal Issues CFPB Debt Collection Consent Order Enforcement FDCPA FCRA Regulation V Nonbank

  • CFPB report on FDCPA highlights medical debt collection issues

    Federal Issues

    On November 16, the CFPB released its annual Fair Debt Collection Practices Act report, which highlighted challenges specific to medical debt collection. For example, 8,500 complaints were submitted in 2022 related to medical debt collection and described problems such as collectors billing for services never received, collecting the wrong amounts, miscommunication with insurance companies or financial assistance programs, or placing bills on credit reports without prior consumer contact. The report emphasized collectors may violate federal law when they pursue inaccurate medical bills and stressed the need for medical debt collectors to comply with the Fair Debt Collection Practices Act, the No Surprises Act, and the Fair Credit Reporting Act.

    The report also includes developments in state law regarding medical debt collection, including recent legislation in Colorado, New York, Maine, and Nevada. Additionally, the report contains sections related to supervision of debt collection activities, enforcement actions, education and outreach initiatives, rulemaking, and research and policy initiatives. 

    Federal Issues CFPB Medical Debt FDCPA Consumer Protection FCRA

  • Court infers receipt of validation notice to allow pro se plaintiffs’ FDCPA claim to survive


    On September 19, the U.S. District Court for the Eastern District of New York granted in part and denied in part a complaint filed by two pro se plaintiffs who alleged that the defendant’s debt collection efforts related a balance due from a timeshare membership program violated the FCRA, TILA, and FDCPA. In reaching its decision, the court explained that complaints filed by pro se pleadings must be construed more liberally than those drafted by lawyers. Notwithstanding this more liberal approach, however, the court still determined that plaintiffs’ TILA and FCRA claims were insufficiently pled.  With respect to the TILA claim, the court stated that plaintiffs failed to specify which provisions were allegedly violated and only alleged that “Defendant has computed and imposed an internal alleged account balance on plaintiff including principal balance, interest rates, fees and terms without property consumer transparency of mode of accounting verification methods,” which was insufficient to allege a TILA violation. The court noted that to the extent it could interpret plaintiffs’ complaint to implicate specific provisions of the FCRA, plaintiffs still failed to state claim under any of the potentially relevant provisions, either because there was no private right of action or there were no facts supporting any alleged claims.

    By contrast, plaintiffs did allege specific provisions of the FDCPA that defendant’s conduct purportedly breached. While the court still concluded that plaintiffs failed to state a claim with regard to most of the cited FDCPA provisions, it determined that plaintiffs had plausibly stated a claim under 15 U.S.C. § 1692g, which, among other things, requires a debt collector to cease debt collection efforts if, within 30 days of receiving a validation notice from the debt collector, a consumer disputes the debt or any portion thereof.

    Although the record did not reflect whether the defendant had sent plaintiffs a validation notice, the court, in liberally construing plaintiffs’ complaint, found it reasonable to “infer” that such notice had been provided to the plaintiffs. Specifically, the court reasoned that plaintiffs’ notarized letter to defendant, titled “Validation of Debt / Claim” was likely sent in response to a validation notice from defendant, and therefore, under Section 1692g, all collection activity should have ceased following receipt of plaintiffs’ letter.

    Courts FDCPA New York TILA FCRA Debt Collection Consumer Finance

  • FTC fines two companies $6M for inaccurate background reports

    Federal Issues

    The FTC fined two companies that sell consumer background reports through subscriptions for violations of the FTC Act and Fair Credit Reporting Act (“FCRA”). In addition to allegedly claiming, without substantiation, to have the most accurate reports available to the public, the complaint says two companies deceptively claimed individuals had criminal or arrest records when the individual did not; deceptively claimed consumers can remove information or flag it as inaccurate, and deceptively failed to disclose that third-party reviews were incentivized and biased.

    The companies also furnished consumer reports to subscribers “without reason to believe those subscribers have permissible purposes to obtain such reports.”

    The stipulated order requires the companies to pay a civil penalty of $5.8 million, prohibits them from advertising, marketing, promoting, or offering for sale certain reports including arrest records, bankruptcy records, and eviction records until the establish and implement a comprehensive monitoring program, and prohibits them from continuing any of the deceptive practices set forth in the complaint.

    Federal Issues FTC Enforcement FTC Act FCRA Consumer Reporting Deceptive Third-Party

  • USDA urges Supreme Court to overturn FCRA 3rd Circuit ruling


    On August 15, the USDA filed a brief urging the U.S. Supreme Court to overturn a U.S. Court of Appeals for the Third Circuit decision to reverse its FCRA lawsuit brought by a plaintiff who alleged that the consumer credit reporting agency reported two loans as past due even though he claimed both were closed with a $0 balance. In August 2022, the 3rd Circuit reversed a district court’s decision to grant a student loan servicer, consumer credit reporting agency, and the USDA’s (defendants) motion to dismiss a case finding that Congress unambiguously waived the government’s sovereign immunity in enacting FCRA (covered by InfoBytes here). The USDA argues that the district court was wrong in its decision, and that the FCRA does not waive the U.S.’s sovereign immunity for claims under 15 U.S.C. 1681n and 1681o because, among other things, (i) a waiver of sovereign immunity requires “unmistakably clear” statutory language; (ii) the FCRA does not create a cause of action that “‘expressly authorizes suits against sovereigns,’ and ‘recognizing immunity’ would ‘negate[]’ that express authorization”; (iii) the FCRA uses “persons” in a way that does not distinguish between sovereign and non-sovereign senses; (iv) “inexplicable incongruencies” with the term “person” within the context of §§ 1681n and 1681o includes a sovereign entity, which would not only expose the federal government but also individual states to potential lawsuits seeking monetary damages; and (v) interpreting the FCRA to permit lawsuits against the U.S. would significantly broaden the scope of liability for federal agencies, creating “overlap” already provided by the Privacy Act.

    Courts FCRA Third Circuit Consumer Reporting Agency Consumer Finance Credit Furnishing Credit Report Sovereign Immunity Department of Agriculture U.S. Supreme Court

  • Chopra announces rulemaking for data brokers

    Federal Issues

    On August 15, CFPB Director Rohit Chopra delivered remarks at the White House Roundtable on the harms of data broker practices. Referencing the prevalence of artificial intelligence in data surveillance, Chopra highlighted a common practice employed by companies: the gathering, leveraging, and sharing of data concerning consumers, including individual pieces of data or consumer profiles, without consumers’ awareness with third parties that employ AI to formulate forecasts and decisions. These detailed data sets can also easily be exploited by bad actors, Chopra warned. Chopra announced that after conducting an inquiry into data broker practices, the Bureau will endeavor to make rules regulating data broker surveillance to ensure sensitive data is not misused and on par with FCRA requirements.

    Two proposals are being considered: the first proposal would define the term “consumer reporting agency” to include a data broker that sells certain types of consumer data, thereby triggering requirements to ensure accuracy and to govern disputes concerning the reporting of inaccurate information. The second proposal will address existing confusion by clarifying the existing confusion concerning “the extent to which credit header data constitutes a consumer report, [and] reducing the ability of credit reporting companies to impermissibly disclose sensitive contact information that can be used to identify people who don’t wish to be contacted, such as domestic violence survivors.” The rulemaking will also complement efforts put forth by the FTC.

    Federal Issues CFPB Consumer Protection Data Brokers Artificial Intelligence FCRA

  • Judge grants MSJ in class action over disputed debt investigation


    On July 28, the U.S. District Court for the Southern District of Alabama granted summary judgment in favor of a defendant third-party debt collector in an FCRA and FDCPA putative class action, holding that the defendant carried out a reasonable investigation following plaintiff’s dispute of the debt it had reported to credit reporting agencies (CRAs) and that the plaintiff failed to establish that the defendant knew or should have known that the debt was inaccurate or invalid. Defendant entered into an asset purchase agreement with another third-party debt collector and reported debts to credit reporting agencies under the name of the non-defendant third-party debt collector, including an account erroneously associated with plaintiff. When defendant received notice that plaintiff disputed the erroneous account information, defendant verified the account information in its system and provided by the CRA, asked the creditor to provide account documentation, and then requested that the CRAs delete their reporting of the account once the creditor failed to provide account documentation within the requested thirty-day period.

    In relation to the FCRA claim, the court found that the defendant “did everything required by the FCRA in response to Plaintiff’s dispute” such that the plaintiff “failed to establish how this investigation was not reasonable” or in violation of the FCRA. The court also found that plaintiff “failed to show that any different result would have occurred had [defendant] conducted any part of its investigation differently.” Finally, plaintiff’s claim failed as a matter of law concerning defendant’s initial report of the debt to the CRAs because the defendant was not required under the FCRA to “investigate the validity of a debt before commencing to report on that account to the CRAs.” While the defendant was prohibited from reporting inaccurate consumer information, no private cause of action exists for violations of this initial reporting provision of the FCRA.

    For the FDCPA claim, the court held that the plaintiff failed to establish that the defendant had knowledge that the debt it reported was not accurate or was otherwise disputed or invalid. Because the CFPB passed Regulation F in November 2021, after the events at question in this litigation, furnishing information regarding a debt to a CRA before communication with plaintiff was not unlawful at that time. Finally, the court found that plaintiff failed to timely assert that defendant violated the FDCPA provision prohibiting false, deceptive, or misleading representation by using the non-defendant third-party debt collector’s name when reporting the account to the CRAs because this allegation was not present in plaintiff’s complaint.

    Courts Third-Party Debt Collection FCRA FDCPA Alabama Credit Reporting Agency Class Action


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