Written by attorney Ralph Erskine Stevenson III

Fair Credit Reporting Act in litigation

In litigation, consumer protection is of the utmost importance. Lawyers defending plaintiffs or defendants will scrupulously uphold existing laws to this effect—or risk having their hard-earned reputations besmirched. However, sometimes opposing parties seek to gain ground by digging into the other side’s background; holding such details up to the light for the purposes of seeing if their opposer’s viewpoints and reputation are “viable" (or believable). As can be seen with lawsuits that are brought to bear, the area of consumer protection is sometimes a bit murky. Parameters are still being set.

Recently, a case was entered into the Pennsylvania dockets when Plaintiff claimed that Defendant had pulled a credit check on her. This, she charged, was in direct violation of the FCRA’s view on permissible purposes in such cases. (The FCRA is the Fair Credit Reporting Act, a federal law that controls the collection and dissemination of credit information.) Defendant counter-claimed that the reason was permissible; that Plaintiff had brought the claim in bad faith and for purposes of harassment.

In a demonstration of how seriously courts take the issue of consumer protection, the Court ruled that, pursuant to § 1681b(a)(3)(F)(i). there was no permissible (or legitimate) business need for Defendant to conduct a credit check. Furthermore, as Defendant had neither performed her due diligence, researching what would constitute permissible purpose, nor had she asked Plaintiff’s permission, that summary judgment was proper in favor of Plaintiff. It was also found that Defendant violated the FCRA. (And, the Court found, because Plaintiff’s claim had merit, Defendant’s counterclaim had no basis.)

In civil cases like this one where consumer protection is involved, two further issues are sometimes at stake: willfull non-compliance and permissible purpose.

Willful Non-Compliance – When plaintiff moved for summary judgment (a decision or determination made by a court without a full trial), as occurred in this case, it is believed that the merits of the case are very strong. Plaintiff wished to further seek summary judgment on the issue of the wilfulness of Defendant in defying the FCRA when she pursued a credit check on her, in the course of litigation.

Pursuant to § 1681o, a plaintiff can recover actual damages and attorneys’ fees, as well as litigation costs, if the defendant is found to be in direct violation of the FCRA. The amounts which may be sought are at least $100 and as much as $1,000, or $1,000 or actual damages, whichever is greater Additionally, punitive damages, and other reasonable costs may be awarded. The court’s determination is based on whether the accused party acts with deliberate disregard for the rights of others. Following this qualifier, the Court was unable to find sufficient evidence on Defendant’s “frame of mind" to award summary judgment.

Permissible Purpose – In this case, Plaintiff was trying to show there was a violation of the FCRA regulations—a credit card obtained– without a legitimate business need. To do this, Plaintiff had to prove four things:

1) That the consumer report did in fact exist;

2) That Defendant did obtain this report;

3) That Defendant did this without a permissible statutory purpose and

4) That Defendant was willful (or deliberate) or deemed negligent in doing so.

Defendant admitted it pulled the credit report to find out if it would be financially viable to put forth a counterclaim against Plaintiff. Defendant justified its position by pointing out the particulars of § 1681b(a)(3)(F)(i), which permits a consumer report to be furnished “in connection with a business transaction" that the customer initiates. This had apparently been the case, for Defendant represented Plaintiff’s former employer.

However, the Court found Defendant’s case distinguishable (or markedly dissimilar) to the mentioned case law. It furthermore noted that, according to the Third Circuit (The U.S. Court of Appeals for the Third Circuit, which has jurisdiction over the district in which the suit was bought.), obtaining a consumer report in preparation for litigation is not a legitimate business need. In this way, the consumer rights of Defendant were protected.

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