Fair Credit Reporting Act. David N. Anthony, Troutman Sanders LLP John Soumilas, Francis & Mailman, P.C.

Transcription

1 Fair Credit Reporting Act David N. Anthony, Troutman Sanders LLP John Soumilas, Francis & Mailman, P.C. 1

2 Agenda FCRA Overview Notable Class Action Settlements and Jury Verdicts High Risk Technical Issues & Litigation/Enforcement Safeco and Willfulness Issues Continue to Evolve Spokeo and Standing Developments 2

3 FCRA Overview Statutory purposes and requirements Accuracy Requirements Privacy Restrictuions Disclosure Rights FCRA Governed Purposes Financial services (credit reporting) Employment use (background checks) 3

4 FCRA Trends Notable Class Action Settlements $18,500,000 $9,000,000 $3,590,255 $18,000,000 $802,720 $6,749,000 $4,750,000 $5,700,000 $1,750,000 $4,080,000 $3,000,000 $8,000,000 4

5 FCRA Trends Notable FCRA Jury Vedicts Ramirez v. TransUnion, No. 3:12-cv (N.D. Cal.) Over $60 million in statutory and punitive damages awarded by FCRA jury against Trans Union, LLC for willful violations. Williams v. First Advantage LNS Screening $250,000 in compensatory damages and $3.3 million in punitive damages. 5

6 High Risk Technical Issues & Litigation 2017 trends focused on the following areas: Furnisher Obligations and related litigation Technical Accuracy Bankruptcy Issues Mixed Files 6

7 High Risk Technical Issues & Litigation Furnisher Obligations 15 U.S.C. 1681s-2(a) and (b) The Furnisher Rule (Regulation V) Furnisher information must be accurate and complete Furnishers must investigate consumer disputes Requires accurate understanding and use of Metro 2 7

8 High Risk Technical Issues & Litigation Furnisher Litigation Johnson v. MBNA Am. Bank, NA, 357 F.3d 426 (4th Cir. 2004) ( Investigation requires some degree of careful inquiry. According to Johnson, it would make little sense to conclude that, in creating a system intended to give consumers a means to dispute and, ultimately correct inaccurate information on their credit reports, Congress used the term investigation to include superficial unreasonable inquiries by creditors. ) Saunders v. Branch Banking and Tr. Co. of VA, 526 F.3d 142, 150 (4th Cir. 2008) (A furnisher s decision to continue reporting a disputed debt without any notation of the dispute presents a cognizable claim under 1681s 2(b).) Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1164 (9th Cir. 2009) ( A disputed credit file that lacks a notation of dispute may well be incomplete or inaccurate within the meaning of the FCRA, and the furnisher has a privately enforceable obligation to correct the information after notice. 1681s 2(b)(1)(D). We thus conclude that the statute permits Gorman to bring his claim regarding MBNA s failure to report the charge still disputed. ). Seamans v. Temple Univ., 744 F.3d 853, 867 (3d Cir. 2014) (Concluding that a private cause of action arises under 15 U.S.C. 1681s 2(b) when, having received notice of a consumer's potentially meritorious dispute, a furnisher subsequently fails to report that the claim is disputed. ) 8

9 High Risk Technical Issues & Litigation Regulatory Action against Furnisher Enforcement action against one of the nation s largest banks for alleged failures related to information provided for checking account screening reports. CFPB claimed bank failed to provide accurate information to certain screening companies which use the information to determine whether a consumer can open a bank account. Banks that supply information for checking account screening reports required to have proper processes in place for reporting accurate information. CFPB ordered bank to pay $4.6 million penalty. Uncertainty as to new CFPB enforcement and rule-making. 9

10 High Risk Technical Issues & Litigation Technical Accuracy Pedro v. Equifax, Inc., 868 F.3d 1275, 1278 (11th Cir. 2017) Pedro failed to allege a willful violation of section 1681e(b) because it was not objectively unreasonable for the consumer reporting agencies to read section 1681e(b) to permit them to report information about accounts for which the consumer is an authorized user. Pedro affirmed dismissal on willfulness because it concluded Eleventh Circuit had not previously held that mere technical accuracy was insufficient. This general result may have limited application in light of the existence in most Circuits of appellate decisions finding that FCRA inaccuracy includes misleading or incomplete reporting as well as technical inaccuracy. 10

11 High Risk Technical Issues & Litigation Bankruptcy Trends Difficulties with reporting accounts subject to a Chapter 13 bankruptcy resulted in increased litigation in Metro 2 standards in the Consumer Data Industry Association s Credit Reporting Resource Guide have been used as a basis to allege that a failure to report an account based on terms of plan results in inaccurate credit reporting. In 2017, courts largely rejected this theory: despite a plan being in place, many debtors still fail to make payments and original terms may be ultimately reinstated. 11

12 High Risk Technical Issues & Litigation Mixed Files Red Flags in Disputes Disputes involving claims by a consumer that a tradeline is not his/hers Disputes with carefully prepared statement of dispute and attorney letters Claims that reporting is inaccurate because of bankruptcy Substantive dispute that alleges that the furnisher has not responded appropriately to prior disputes Identity Theft Disputes Disputes involving claims by a consumer that a tradeline is the result of identity theft Several notable six-figure court judgments in this area Need to apply human judgment Can request affidavit from consumer, per FTC guidance, if reasonable reinvestigation would require additional information 12

13 Safeco and Willfulness Continues to Evolve In Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 69, 127 S. Ct the Supreme Court held that a FCRA defendant s conduct is reckless (and thus willful) only if it was objectively unreasonable in light of legal rules that were clearly established at the time. Thus, even when a court disagrees with a party s reading of FCRA, it may not impose liability for a reckless, and therefore willful, violation of the statute unless that party s reading is objectively unreasonable. 13

14 Safeco and Willfulness Continues to Evolve Two questions: 1. Must a Defendant prove that it actually had a reading or interpretation of the FCRA before it is entitled to argue Safeco s objectively reasonable defense? 2. What happens if the court finds that a Defendant s interpretation was not objectively reasonable? 14

15 Safeco Question 1 Must a Defendant prove that it actually had a reading or interpretation of the FCRA before it is entitled to argue Safeco s objectively reasonable defense? Levine v. World Fin. Network Nat. Bank, 554 F.3d 1314, 1319 (11th Cir. 2009) Fuges v. Sw. Fin. Servs., Ltd., 707 F.3d 241, 251 (3d Cir. 2012) Long v. Tommy Hilfiger U.S.A., Inc., 671 F.3d 371, (3d Cir. 2012) 15

16 Safeco Question 1 Some courts indicate that a defendant must allege it had a specific reading of the statute before it can rely on a Safeco defense: Pedro v. Equifax, Inc., 868 F.3d 1275, (11th Cir. 2017) Lewis v. Southwest Airlines Co., No. 3:16-cv-01538, 2018 U.S. Dist. LEXIS 5576 (N.D. Tex. Jan. 11, 2018) Graham v. Pyramid Healthcare Sols., Inc., No. 8:16-CV-1324-T-30AAS, 2017 WL , at *3 (M.D. Fla. June 28, 2017) Milbourne v. JRK Residential Am., LLC, 202 F. Supp. 3d 585, (E.D. Va. 2016) Frazier v. Vintage Stock, Inc., No. CIV D, 2016 WL , at *7 (W.D. Okla. Nov. 28, 2016) 16

17 Safeco Question 2 What happens if the court finds that a Defendant s interpretation was not objectively reasonable? Syed v. M-I, LLC, 853 F.3d 492, (9th Cir.), cert. denied, 138 S. Ct. 447 (2017) Because the statute unambiguously bars M-I s interpretation, whether or not M-I actually believed that its interpretation was correct is immaterial.... M-I ran an unjustifiably high risk of violating the statute. Dreher v. Corp., No. 2:08-cv-01730, 2013 WL , at *11 (W.D. Pa. Dec. 2, Experian Info. Sols., Inc., 71 F. Supp. 3d 572, 583 (E.D. Va. 2014), vacated on standing grounds, 856 F.3d 337 (4th Cir. 2017) Reardon v. ClosetMaid 2013) 17

18 Spokeo and Standing Issues Spokeo Update Case was remanded to the Ninth Circuit for further consideration of whether that plaintiff had sufficiently alleged a harm to satisfy Article III in light of the Supreme Court s holding. In early 2017, the Ninth Circuit ruled that he had. The case has now been remanded to the district court for further proceedings. On December 4, 2017, however, the defendant filed a second cert petition to the Supreme Court, which was placed on the docket as Case No The petition was denied January 22,

19 Spokeo and Standing Issues Know the law in your Circuit! Second Circuit Strubel v. Comenity Bank, 842 F.3d 181, 190 (2d Cir. 2016) Zirogiannis v. Seterus, Inc., No CV, 2017 WL , at *2 3 (2d Cir. Sept. 12, 2017) Katz v. Donna Karan Co., L.L.C., 872 F.3d 114, 121 (2d Cir. 2017) Third Circuit In re Horizon Healthcare Servs. Inc. Data Breach Litig., 846 F.3d 625, (3d Cir. 2017) Manuel v. NRA Group LLC; et al., No , 2018 WL , at *3 (3d Cir. Jan. 12, 2018) 19

20 Spokeo and Standing Issues Fourth Circuit Dreher v. Experian Info. Sols., Inc., 856 F.3d 337 (4th Cir. 2017) Beck v. McDonald, 848 F.3d 262 (4th Cir. 2017) Moore v. Blibaum & Assocs., P.A., 693 F. App'x 205, 206 (4th Cir. 2017) Ben-Davies v. Blibaum & Assocs., P.A., No , 2017 WL , at *1 (4th Cir. June 1, 2017) Sixth Circuit Lyshe v. Levy, 854 F.3d 855, 859 (6th Cir. 2017) Galaria v. Nationwide Mut. Ins. Co., 663 F. App x 384, 388 (6th Cir. 2016) 20

21 Spokeo and Standing Issues Seventh Circuit Meyers v. Nicolet Restaurant of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016) Groshek v. Time Warner Cable, Inc., 865 F.3d 884, 887 (7th Cir. 2017) Gubala v. Time Warner Cable, Inc., 846 F.3d 909 (7th Cir. 2017) Eighth Circuit Braitberg v. Charter Commc'ns, Inc., 836 F.3d 925, (8th Cir. 2016) In re SuperValu, Inc., 870 F.3d 763, 773 (8th Cir. 2017) Heglund v. Aitkin Cty., 871 F.3d 572, 577 (8th Cir. 2017), cert. denied sub nom. Heglund v. City of Grand Rapids, Mich., No , 2018 WL (U.S. Jan. 16, 2018) 21

22 Spokeo and Standing Issues Ninth Circuit Robins v. Spokeo, Inc., 867 F.3d 1108, (9th Cir. 2017) Eleventh Circuit Pedro v. Equifax, Inc., 868 F.3d 1275, (11th Cir. 2017) Nicklaw v. CitiMortgage, Inc., 855 F.3d 1265, (11th Cir. 2017) D.C. Circuit Owner-Operator Indep. Drivers Ass n, Inc. v. United States Dep t of Transportation, No , 2018 WL , at *4 (D.C. Cir. Jan. 12, 2018) 22

23 Questions? 23