Court Dismisses FCRA Class Action Lawsuit Against Consumer Reporting Agency Citing Spokeo Ruling

Gavel and Scales.

Written By ESR News Blog Editor Thomas Ahearn

On September 23, 2019, a District Court in Virginia granted a motion to dismiss a class action lawsuit where the plaintiffs – applicants who applied for jobs with Wells Fargo between August 17, 2012, and April 10, 2015 – claimed the defendant, a Consumer Reporting Agency (CRA) performing background checks on the job applicants for Wells Fargo, violated the federal Fair Credit Reporting Act (FCRA).

Enacted in 1970, the FCRA 15 U.S.C. § 1681 promotes the accuracy, fairness, and privacy of consumer information contained in the files of “CRAs” – the official term for background screening firms – 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.

The Memorandum Opinion written by U.S. District Judge M. Hannah Lauck and filed in the U.S.  District Court for the Eastern District of Virginia Richmond Division dismissed the class action lawsuit that brought three claims of willful FCRA violations against the CRA caused when the plaintiffs applied for jobs with Wells Fargo using the CRA’s Internet Portal that generated their background check reports:

  • Count One: Violation of the FCRA, 15 U.S.C. § 1681b(b)(1)(A), the “Certification Claim” – CRA furnished a consumer report for employment purposes without receiving a valid certification from Wells Fargo, and based on a disclosure and authorization form that it knew or should have known was unlawful.
  • Count Two: Violation of the FCRA, 15 U.S.C. § 1681b(b)(3)(A), the “Adverse Action Claim” – CRA failed to timely provide a copy of the consumer reports and FCRA summaries of rights to Plaintiffs before taking adverse employment action.
  • Count Three: Violation of the FCRA, 15 U.S.C. § 1681k(a)(1–2), the “Notice Claim” – CRA did not notify Plaintiffs that it would provide Wells Fargo with a consumer report containing public record information likely to have an adverse effect on their ability to obtain employment nor did CRA maintain strict procedures to ensure the adverse public record information was complete and up to date.

The CRA argued the plaintiffs lacked standing under Article III of the United States Constitution to pursue the claims. Judge Lauck cited the Supreme Court ruling in Spokeo v. Robins that, to establish standing, a plaintiff must have: “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant; and, (3) that is likely to be redressed by a favorable judicial decision.”

On May 16, 2016, the Supreme Court ruled in Spokeo v. Robins that consumers must prove “an injury in fact” 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” – for alleged FCRA violations caused when Spokeo provided inaccurate information about him in a consumer report.

Judge Lauck wrote: “Plaintiffs have failed to demonstrate a sufficient injury-in-fact because they knowingly and actively consented to the dissemination of their information to Wells Fargo when they traveled to the [CRA’s] portal for the explicit purpose of allowing Wells Fargo to obtain a background check.’” This action amounted to consent “independent of the violative FCRA forms or processes.”

Under the FCRA, a consumer report may not be procured unless: (1) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and, (2) the consumer has authorized in writing the procurement of the report by that person.

The Court found the employer created consent when the applicants “knowingly and actively consented” to go to the CRA’s applicant portal for a background check and so the language of the disclosure form became irrelevant. The applicants knew that by going to the CRA’s website that they were authorizing their consumer reports to be sent to their potential employer as required under the FCRA.

While this decision was favorable to the CRA, improper disclosures that are not “standalone” documents can be costly to both CRAs and employers. Settlements for these FCRA violations include 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.

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