Fair Credit Reporting Act (FCRA)

Written By ESR News Blog Editor Thomas Ahearn

On October 18, 2019, a California federal judge decertified a class of approximately 6,547,400 applicants in a class action lawsuit against Walmart that claimed the retail giant procured background checks using disclosure forms that violated the federal Fair Credit Reporting Act (FCRA), finding the plaintiffs failed to allege an injury sufficient enough as required under the Supreme Court ruling in Spokeo, Inc. v. Robins.

In the Order granting Walmart’s Motion to Decertify, Judge David O. Carter of the U.S. District Court Central District of California remanded the case of Randy Pitre v. Wal-Mart Stores Inc. – which questioned whether Walmart’s background checks complied with the FCRA and the Investigative Consumer Reporting Agencies Act (ICRAA) – to the Superior Court of California, County of Orange.

The Order stated Plaintiff Pitre and two Named Plaintiffs applied for jobs and were hired by Walmart between 2014 and 2017. Plaintiffs claimed that Walmart procured credit and background checks about them in violation of the FCRA and ICRAA “by willfully including extraneous information in disclosure forms, and by inadequately informing Plaintiffs of their rights under the FCRA.”

According to the complaint filed in July of 2017, Section 1681 b(b )(2)(A)(i) of the FCRA requires that a “clear and conspicuous” disclosure be made to consumers before a “consumer report” – the FCRA’s term for a background check report – is procured. Also, the disclosure that a consumer report may be obtained for employment purposes must be made “in a document that consists solely of the disclosure.”

Due to Article III of the United States Constitution, courts have developed the doctrine of Article III standing to “limit the category of litigants empowered to maintain a lawsuit in federal court,” according to Spokeo, Inc. v. Robins. The Plaintiff must have suffered a concrete injury in fact that is fairly traceable to the defendant’s alleged conduct and likely redressable by a favorable decision by the court.

With regard to the Supreme Court ruling in Spokeo, Inc. v. Robins, Judge Carter wrote: As the Supreme Court has explained, “a bare procedural violation, divorced from any concrete harm,” cannot satisfy the injury-in-fact requirement. A key inquiry, then, is not merely whether a statutory right was violated, but whether that violation actually harmed (or posed some risk of harm) to some concrete interest.

Judge Carter – who in January of 2019 certified a class of five million applicants in the same case – agreed with Walmart’s argument that Plaintiffs lacked standing under Article III, decertified the class, and remanded the action to the state court “to determine whether Plaintiffs have standing under California law.” A PDF version of the Order Granting the Motion to Decertify is available here.

On May 16, 2016, the Supreme Court ruled in Spokeo v. Robins that consumers must prove “concrete injury” in class action lawsuits for alleged “bare” violations of a federal statute such as the FCRA. The case involved a man who filed a lawsuit against Spokeo – an online “people search engine” – claiming violations of the FCRA after Spokeo compiled a report about him that contained inaccurate information.

Enacted in 1970, the FCRA 15 U.S.C. § 1681 promotes the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies (CRAs), protects consumers from the willful and/or negligent inclusion of inaccurate information in their credit reports, and regulates the collection, dissemination, and use of consumer information, including consumer credit information.

Improper disclosures for background checks that are not a “standalone” document and violate the FCRA can be costly. Similar FCRA lawsuits settled for millions of dollars include Delta Air Lines agreeing to pay $2.3 million in January 2019, Omincare paying a $1.3 million settlement in August 2018, a subsidiary of PepsiCo paying $1.2 million in July 2018, and Frito-Lay Inc. paying a $2.4 million settlement in April 2018.

Employment Screening Resources® (ESR) – a leading global background check provider – offers two complimentary white papers that examine the causes that lead to 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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