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Class Action Defense Issues-Barnette v. Brook Road: 2003 Amendment to Federal Fair Credit Reporting Act (FCRA) Did Not Eliminate All Private Rights Of Action Under § 1681m But Only Those Under § 1681m(h) Virginia District Court Holds

Federal District Court Holds Use of Word “Section” Instead of “Subsection” in FCRA (Fair Credit Reporting Act) § 1681m(h)(8) was a Drafting Error and Denies Defense Motion for Judgment on the Pleadings

The federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., enacted in 1970, has been described by courts as both “comprehensive” and “complex.” In part, it sets forth statutory requirements governing the use of consumer reports. See 15 U.S.C. § 1681m. In 2003, Congress amended the FCRA by enacting the Fair and Accurate Credit Transactions Act (FACTA). The amendments included adding subsection (h) to § 1681m, which provides: Section 1681m(h)(8) states that no civil actions may be filed for “any failure by any person to comply with this section” (italics added); rather, such violations “shall be enforced exclusively under section 1681s” (italics added), which provides for administrative enforcement of FCRA violations.

Following a so-called “yo-yo” car sale, the consumer/purchaser filed suit in federal court against Brook Road, Inc. alleging violations of various state and federal laws, as well as common law causes of action. Barnette v. Brook Road, Inc., 429 F.Supp.2d 741 (D. Va. 2006). The complaint included an FCRA claim under § 1681m(a) and (b), based on the allegation that the lender had obtained and relied on her credit report, and had engaged in an “adverse action” in reliance on the report, but had failed to provide her with the required notice of the adverse action. Id., at 745. The defense moved for judgment on the pleadings on the grounds that FACTA eliminated private rights of action for all violations of § 1681m; the consumer argued that the use of the word “section” in § 1681m(h)(8) was a typographical error, and that Congress intended to bar private rights of action only for alleged violations of subsection (h). Id., at 746.

The federal court recognized that the defense interpretation had been adopted by several courts, Barnette, at 746-47 (and cases cited); however, the court’s review of the Congressional intent behind the FCRA and FACTA, and its analysis of the statutory scheme, persuaded the court that use of the word “section” was indeed a scrivener’s error and that Congress had intended to eliminate private rights of action only for alleged violations of § 1681m(h). Id., at 749. We do not summarize all of the court’s reasoning here; the opinion may be found below and it is well worth reading. We do note that the court found persuasive the fact that another provision of FACTA provided that civil actions may not be maintained for alleged violations of § 1681m(e), and that this would have been “superfluous” if FACTA already eliminated all private rights of action under each subsection of § 1681m. Id., at 748.

NOTE: The district court also addressed a challenge to the consumer’s fraud claim and to the Virginia Consumer Protection Act claim, and rejected both challenges. We do not summarize those portions of the court’s order.

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