Consumer Reporting Agency to Pay $3.6 Million to Settle FCRA Lawsuit

Scales and gavel.

Written By ESR News Blog Editor Thomas Ahearn

On November 12, 2019, a Florida federal judge granted final approval for a $3.6 million settlement in a class action lawsuit filed against a Consumer Reporting Agency (CRA) to resolve allegations that the CRA violated the federal Fair Credit Reporting Act (FCRA) by providing employers with background checks conducted on job applicants without proper authorization as required under the FCRA.

Plaintiffs Shawana Sanders and Kenyatta Williams – on behalf of themselves and similarly situated individuals – claimed the Defendant CRA violated the FCRA by providing certain reports without first obtaining certification from employers using the reports that they would comply with the FCRA in using the reports. The CRA vigorously denied liability and wrongdoing, but indicated the lawsuit was being settled to avoid litigation and court costs.

The Notice of Class Action Settlement stated: The Defendant has denied all claims in the Lawsuit and contends that it acted lawfully and in compliance with the FCRA at all times. The Defendant has multiple defenses to the claims in the Lawsuit. Despite denying liability and wrongdoing, the Defendant has decided it is in its best interest to settle the Lawsuit to avoid the burden, expense, risk, and uncertainty of continuing the litigation.

Senior U.S. District Judge John E. Steel approved a settlement where the CRA agreed “to establish a gross settlement fund in the amount of $3,653,650” for a Settlement Class of approximately 18,931 consumers who were the subject of consumer reports furnished by the CRA for employment purposes between July 11, 2013, and January 11, 2019, according to the settlement filed in the U.S. District Court Middle District of Florida.

Enacted in 1970, the FCRA promotes the accuracy, fairness, and privacy of consumer information contained in the files of “CRAs” – the official term for background check providers – and also protects consumers from the willful and/or negligent inclusion of inaccurate information in their “consumer reports,” the official term for background check reports used for employment purposes.

Under Section 1681b(b)(1) of the FCRA, a CRA may furnish a consumer report for employment purposes only if the person obtaining the report certifies to the CRA compliance with requirements that “a clear and conspicuous disclosure has been made in writing” to a consumer that a report for employment purposes may be obtained and that the consumer authorized in writing the procurement of the report.

Section 1681b(b)(1) of the FCRA also requires that a person intending to take “adverse action” such as termination against a consumer based in whole or in part on a consumer report for employment purposes shall provide to the consumer a copy of the report and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act” prescribed by the Consumer Financial Protection Bureau (CFPB).

According to an amended complaint filed in October of 2018, a property management company used the web-based portal of an employee staffing and leasing service to obtain consumer reports about Williams and Sanders from the CRA in 2016. However, the complaint claimed the property management company never certified compliance with the FCRA before obtaining the consumer report from the CRA.

Williams and Sanders were terminated in October of 2016 based upon the consumer reports the CRA unlawfully furnished to the property management company. However, the complaint claimed that they were never provided pre-adverse action notification pursuant to the FCRA, most likely because the property management company never certified to the CRA that it would provide such notification.

The complaint went on to state that the “Plaintiffs lost their jobs, were not provided with the proper notice so that they learned of their rights to dispute any information in the reports or to otherwise discuss the information in those reports” before they were fired, “and had their consumer reports improperly accessed because Defendant failed to obtain the appropriate certifications.”

While this FCRA lawsuit involved a CRA, lawsuits claiming violations of the FCRA can also be costly to employers. Examples of employers paying for alleged FCRA violations include 7-Eleven paying $1.9 million in June 2019, Delta Air Lines paying $2.3 million in January 2019, Omincare paying $1.3 million in August 2018, a subsidiary of PepsiCo paying $1.2 million in July 2018, and Frito-Lay Inc. paying a $2.4 million in April 2018.

Employers have paid out $174 million over the past decade to settle class action lawsuits that claim they violated the FCRA, according an examination of 146 successful class action lawsuits brought under the statute that was compiled by Good Jobs First. Background screening companies providing consumer reports have paid out another $152 million when they have been sued directly, Good Jobs First found.

Employment Screening Resources® (ESR) – a leading global background check provider – offers two complimentary white papers that examine the causes of many costly FCRA lawsuits: “Common Ways Prospective or Current Employees Sue Employers Under the FCRA” and “Common Ways Consumer Reporting Agencies are Sued Under the FCRA.” To learn more about ESR, visit www.esrcheck.com.

NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

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