Class Action Complaints Alleging FCRA Violations Erroneously Dismissed because FACTA Amendments Eliminating Private Rights of Action for FCRA § 1681m Violations cannot be Applied Retroactively to Class Action Claims Premised on Violations that Occurred Prior to FACTA’s Effective Date Seventh Circuit Holds
Plaintiff Linda Killingsworth filed a class action against Household Bank (now HSBC Bank Nevada) alleging that the prescreened credit card offer extended to her by the Bank prior to August 20, 2004 violated the federal Fair Credit Reporting Act (FCRA), and plaintiff Erick Sawyer separately filed a class action against his auto insurance carrier, Ensurance Insurance Services, alleging that in connection with issuing him an auto policy in October 2004 it “violated the FCRA by charging him a higher rate based on negative information in his credit report without giving him notice of that adverse action, and also by using his initial credit information for subsequent renewals of his policy when corrected credit information would have qualified him for a lower rate.” Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 616 (7th Cir. 2007). The class action complaints were filed in the Northern District of Illinois, and defense attorneys in each class action moved to dismiss the complaint based on Section 311 of the federal Fair and Accurate Credit Transactions Act (FACTA), which amended the FCRA to eliminate certain private rights of action under the FCRA. Id., at 617 (citing 15 U.S.C. § 1681m(h)(8)). In each case, the district court agreed and dismissed the class action complaint, id. Both plaintiffs appealed and the Seventh Circuit consolidated the appeals and issued a single opinion address the question of whether Section 311, which became effective on December 1, 2004, “impairs rights [plaintiffs] possessed prior to the new statute’s effective date and therefore has an impermissible retroactive effect if applied to them.” Id. The Seventh Circuit reversed the dismissal of Killingsworth’s class action, concluding that the retroactive application of Section 311 was improper as to her claims, but the Circuit Court remanded for further proceedings as to Sawyer’s class action complaint, concluding that “the retroactivity question cannot be decided at the pleading stage because the conduct alleged in his [class action] complaint straddles FACTA’s effective date.” Id.
The issue before the Seventh Circuit was “whether an amendment to the [FCRA] eliminating private rights of action has an impermissible retroactive effect when applied to FCRA claims that accrued prior to the amendment’s effective date.” Killingsworth, at 616. Section 311 of FACTA added subsection (h) to FCRA § 1681m so as to eliminate private rights of action for violations of § 1681m. Killingsworth received an offer of credit prior to August 20, 2004, but did not file her class action lawsuit until October 2005. Id., at 617. Her class action alleged a violation of § 1681m(d), and defense attorneys moved to dismiss the class action on the ground that no private right of action existed based on Section 311’s amendment to the FCRA. Id., at 617-18. The district court agreed and dismissed Killingsworth’s class action, id., at 618. For his part, Sawyer applied for auto insurance in October 2004, his auto policy took effect on December 20, 2004, and it was renewed twice at six-month intervals. Id., at 618. Sawyer also filed his class action lawsuit after the effective date of Section 311; his class action alleged a violation of § 1681m(a). Id. However, the class action alleged further that “Ensurance failed to consider interim changes to his credit rating and instead relied on his initial credit score when subsequently renewing his policy,” thus implicating acts taken after Section 311’s effective date. Id. As in Killingsworth, defense attorneys moved to dismiss Sawyer’s class action on the ground that no private right of action existed; the federal court agreed and dismissed Sawyer’s class action. Id.