Fair Credit Reporting Act (FCRA)

Written By ESR News Blog Editor Thomas Ahearn

On February 16, 2021, the United States District Court Middle District of Florida Tampa Division denied the Defendant’s motion to dismiss a lawsuit claiming the Defendant allegedly violated the federal Fair Credit Reporting Act (FCRA) that regulates consumer reports in the United States by requesting the Plaintiff’s credit report from two Consumer Credit Reporting Agencies without a “permissible purpose” under the FCRA.

The FCRA prohibits a person from using or obtaining a consumer report for any purpose unless “the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished” under the FCRA and “the purpose is certified in accordance” with the FCRA. The Plaintiff alleged the Defendant obtained her credit report without her consent and “for marketing purposes,” which is not a permissible purpose under the FCRA.

“Plaintiff alleges that Defendant engages in consumer lending of high-interest bearing loans and twice obtained Plaintiff’s credit report without her consent to assess whether she would be a good loan prospect for Defendant’s marketing efforts. That conduct—which the Court must accept as true at this stage—is not a permissible purpose under the FCRA,” United States District Judge Kathryn Kimball Mizelle wrote in the Order.

“Indeed, Defendant fails to make any argument that it obtained Plaintiff’s credit report for a permissible purpose or under a reasonable interpretation of the statute. Accepting Plaintiff’s allegations as true and viewing them in the light most favorable to her, the Court concludes that Plaintiff has adequately pleaded enough facts to proceed past the motion-to-dismiss stage,” District Judge Kimball Mizelle concluded in the Order.

The FCRA was enacted by Congress in 1970 to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies (CRAs), protect consumers from the willful and/or negligent inclusion of inaccurate information in their consumer reports, and regulate the collection, dissemination, and use of consumer information, including consumer credit information.

Lawsuits for alleged violations of the FCRA have become all too common in background screening and can result in monetary awards in the thousands and even millions of dollars. In 2020 alone, FCRA lawsuit settlements were reached for $4.75 million, $4.25 million, $1.28 million, $500,000, $220,000, and $120,000. In addition, an $18 million settlement was proposed and an “excessive” $60 million damages award was reduced by an appeals court.

FCRA lawsuits will continue to serve as legal compliance signposts for employers conducting background checks on job applicants, according to leading global background check provider Employment Screening Resources® (ESR), which compiled the 14th annual “ESR Top Ten Background Check Trends” for 2021. Since 2008, ESR has annually selected the top emerging and influential trends in the background screening industry.

Employment Screening Resources® (ESR) – which was ranked the number one screening firm by HRO Today in 2020 – offers two white papers about “Common Ways Consumer Reporting Agencies are Sued Under the FCRA” and “Common Ways Prospective or Current Employees Sue Employers Under the FCRA” to help CRAs and employers comply with 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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