2022FCRA

Written By ESR News Blog Editor Thomas Ahearn

On May 3, 2022, the United States Court of Appeals for the Eighth Circuit found that there was no provision of the federal Fair Credit Reporting Act (FCRA) that established a right for a prospective or current employee to dispute or explain the contents of a background check (also called “consumer report”) directly with an employer.

The decision stems from a class action lawsuit filed by a woman who applied for a job and responded “no” to a question on an application asking whether she had ever been convicted of a felony. After being offered a job, a background check uncovered felony convictions for murder and armed robbery and the offer was rescinded.

The class action lawsuit filed against the defendant employer alleged three violations of the FCRA, one of which was taking adverse employment action based on a background check without first providing the consumer report to the applicant who was the subject of the report in violation of FCRA 15 U.S.C. § 1681b(b)(3)(A).

Along with a copy of the consumer report, the FCRA also requires employers undertaking adverse action to first provide a summary of rights under the FCRA to the consumer and contact information for the consumer reporting agency (CRA) that furnished the report so the consumer may dispute the report with the CRA.

“Under the FCRA, (the plaintiff applicant in the lawsuit) had an unambiguous right to receive a copy of her consumer report before the adverse action was taken,” Circuit Judge Ralph Erickson wrote in the 16-page ruling as part of the three-judge panel that included Circuit Judges Jane Kelly and Steven Grasz.

“Nonetheless, there are competing views on whether an employer’s failure to comply with the FCRA by providing a copy of the consumer report prior to taking adverse employment action is a bare procedural violation or conduct that causes an intangible harm sufficient to meet minimum Article III requirements for standing.”

The Eighth Circuit explained what qualifies as an “injury in fact” under the FCRA comes from competing interpretations of the U.S. Supreme Court’s decision in Spokeo v. Robins that a “bare procedural violation,” divorced from concrete harm, did not satisfy the injury-in-fact requirement of Article III of the U.S. Constitution.

“While describing Spokeo’s instruction as ‘Delphic,’ one judge noted the immense amount of ink that has been spilled trying to decipher the difference between intangible harm sufficient for Article III standing and ‘a bare procedural violation.’ Given the rather amorphous guidance, courts have reached different results.”

On the one side, the U.S. Court of Appeals for the Third Circuit concluded that “taking an adverse employment action without providing the required consumer report is ‘the very harm that Congress sought to prevent, arising from prototypical conduct proscribed’ by the FCRA.” Similarly, the Seventh Circuit found a plaintiff had standing.

On the other side, the U.S. Court of Appeals for the Ninth Circuit found Article III standing wanting when the plaintiff failed to show “actual harm or a material risk of harm,” reasoning none of the explanations the plaintiff could provide an employer would change the employer’s decision to deny admission into its hiring program.

The Ninth Circuit ruling was cited when stating that “harm present in the cases where courts found standing for a violation of 15 U.S.C. § 1681b(b)(3)(A)(i) was premised on a prospective employee’s right to discuss with an employer the information in the consumer report prior to the employer taking an adverse action.”

However, the Eighth Circuit also noted that “while the FCRA provides a right to dispute inaccurate information in a consumer report, there is no right mandating an employer provide a prospective or current employee an opportunity to dispute or explain the contents of the report directly with the employer.” 

Another Ninth Circuit ruling “concluded there was no provision of the FCRA that establishes a right to dispute a report with an employer directly, as opposed to with the consumer reporting agency, and noted the lack of authority to suggest the right to dispute is broader than what is set forth in the plain language of the statute.”

The Eighth Circuit concluded that the FCRA did not support the plaintiff’s claim “that she has a right under the FCRA to not only receive a copy of her consumer report, but also discuss directly with the employer accurate but negative information within the report prior to the employer taking adverse action.”

Because the United States Court of Appeals for the Eighth Circuit found the plaintiff lacked Article III standing to bring her FCRA claims, the Court vacated a district court’s orders and remanded to the district court with directions that the case be remanded to the Missouri state court. A copy of the ruling is available here

Five years after ruling in Spokeo v. Robins in May 2016, the Supreme Court ruled in TransUnion LLC v. Ramirez in June 2021 that a plaintiff must suffer a “concrete harm” resulting from a violation of federal law such as the FCRA to have sufficient standing under Article III. “No concrete harm, no standing,” the opinion stated.

The FCRA 15 U.S.C § 1681 was enacted by Congress in 1970 to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies, and to protect consumers from the willful and/or negligent inclusion of inaccurate information in their consumer reports.

Employment Screening Resources (ESR) – a service offering of ClearStar, a leading provider of background, drug, and medical screening – offers background screening services that comply with federal FCRA, state, and local laws that regulate background checks in the United States. To learn more, contact ESR today.

NOTE: Employment Screening Resources (ESR) – a service offering of ClearStar – reminds readers that allegations made in class action lawsuits are not proof a business or individual violated any law, rule, or regulation since they are in the pleading stage with no factual adjudications yet.

NOTE: Employment Screening Resources (ESR) – a service offering of ClearStar – 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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