On August 15, the USDA filed a brief urging the U.S. Supreme Court to overturn a U.S. Court of Appeals for the Third Circuit decision to reverse its FCRA lawsuit brought by a plaintiff who alleged that the consumer credit reporting agency reported two loans as past due even though he claimed both were closed with a $0 balance. In August 2022, the 3rd Circuit reversed a district court’s decision to grant a student loan servicer, consumer credit reporting agency, and the USDA’s (defendants) motion to dismiss a case finding that Congress unambiguously waived the government’s sovereign immunity in enacting FCRA (covered by InfoBytes here). The USDA argues that the district court was wrong in its decision, and that the FCRA does not waive the U.S.’s sovereign immunity for claims under 15 U.S.C. 1681n and 1681o because, among other things, (i) a waiver of sovereign immunity requires “unmistakably clear” statutory language; (ii) the FCRA does not create a cause of action that “‘expressly authorizes suits against sovereigns,’ and ‘recognizing immunity’ would ‘negate[]’ that express authorization”; (iii) the FCRA uses “persons” in a way that does not distinguish between sovereign and non-sovereign senses; (iv) “inexplicable incongruencies” with the term “person” within the context of §§ 1681n and 1681o includes a sovereign entity, which would not only expose the federal government but also individual states to potential lawsuits seeking monetary damages; and (v) interpreting the FCRA to permit lawsuits against the U.S. would significantly broaden the scope of liability for federal agencies, creating “overlap” already provided by the Privacy Act.

15 U.S.C. 1681g(c)(2)(A). 15 U.S.C. 1681n, 1681o. Ramirez v. TransUnion LLC, 951 F.3d 1008, 1017 (9th Cir. 2020).

[8] See id. § 1681n (willful violation), § 1681o (negligent violation).[9] See 15 U.S.C. § 1681o.[10] See id. § 1681n.

Similarly, negligent violations may lead to actual damages and reasonable attorneys’ fees and costs. 15 U.S.C. § 1681o(a). For obvious reasons, plaintiffs’ attorneys are drawn to allegations of willful violations in class action lawsuits because of the potential for higher overall recoveries.

While Congress intended to stem the growth of identity theft and credit card fraud, it did not foresee that the damages provisions of the Act would result in potential damage awards of such magnitude as to be capable of causing the bankruptcy, and even the demise, of businesses held to have willfully violated its terms. The Act provides that any person that negligently violates the truncation require¬ment is liable for actual damages, as well as attorneys' fees. 15 U.S.C. § 1681o(a). More significantly, in the case of “willful” violations, the Act provides for recovery of statutory damages of not less than $100 but not more than $1,000 per violation, as well as punitive damages and attorneys' fees. 15 U.S.C. § 1681n(a).

As evidenced by the recent approval of a $5.9 million class settlement in Hunter, et al v. First Transit,, Inc.,Case Nos. 09-CV-6178& 10-CV-7002 (N.D. Ill. Mar. 23, 2011), class actions involving violations of the FCRA carry lofty penalties. Plaintiffs in this litigation alleged that First Transit and First Student, respectively, failed to provide the requisite disclosures to applicants before running a background check on them and also failed to follow the required two-step adverse action process when they denied employment based on information in the criminal background reports.Under the FCRA, an employer can be liable for willful non-compliance, 15 U.S. C. §1681n, or negligent non-compliance, 15 U.S.C. § 1681o. Claims of willful non-compliance carry possible statutory damages of $100 to $1000 per violation, attorneys’ fees, and unlimited punitive damages.

To assess damages under the FCRA, a court must first determine whether the violation was willful. If it was not, the Plaintiff is only entitled to actual damages under 15 U.S.C. § 1681o. Under 15 U.S.C. § 1681n, if the violation was willful, the plaintiff is entitled to the greater of her actual damages or the statutory damages, which are capped at $1,000.