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General Overview Of The Federal Fair Credit Reporting Act (FCRA): Class Action Defense Issues

In 1970, Congress enacted the FCRA (Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.) to “require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information,” 15 U.S.C. § 1681(b). Congress did so based on its recognition that, “There is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’ s right to privacy.” § 1681(a)(4). And to ensure that its goals were met, Congress enacted a section of the FCRA that specifically prohibits consumer reporting agencies from avoiding the effects of the law through “corporate” or “technological circumvention,” see §1681x. Courts have referred to the FCRA’s statutory scheme as both “comprehensive,” FTC v. Manager, Retail Credit Co., 515 F.2d 988, 989 (D.C. Cir. 1975), and “complex,” Skwira v. United States, 344 F.3d 64, 74 (1st Cir. 2003). We provide but a brief overview here.

A “consumer reporting agency” is defined as “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.” 15 U.S.C. § 1681a(f).

A “consumer report,” in turn, is defined as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for – (A) credit or insurance to be used primarily for personal, family, or household purposes; (B) employment purposes; or (C) any other purpose authorized under [this title].” 15 U.S.C. § 1681a(d)(1). For purposes of the FCRA, “employment purposes” is defined so as to include reports “used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.” § 1681a(h).

By definition, a “consumer report” must concern a “consumer” – that is, “an individual.” 15 U.S.C. § 1681a(c). “The purpose of the fair credit reporting bill is to protect consumers from inaccurate or arbitrary information in a consumer report, which is used as a factor in determining an individual’s eligibility for credit, insurance or employment. It does not apply to reports utilized for business, commercial, or professional purposes.Ippolito v. WNS, Inc., 864 F.2d 440, 452 (7th Cir. 1988) (citations omitted, italics in original).

The FCRA provides that a consumer reporting agency “may furnish a consumer report under the following circumstances and no other,” and enumerates inter alia responses to subpoenas, written requests by the consumer, and governmental requests concerning child support. 15 U.S.C. § 1681b (italics added). The FCRA also provides for disclosure of credit information to the consumer, and provides consumers with the right to contest information contained therein, see § 1681g. In the event a consumer disputes information in a credit report, the FCRA provides an elaborate procedure to be followed that provides, inter alia, for reinvestigations and statements from the consumer explaining the dispute (if reinvestigation fails to resolve it). § 1681i.

Finally, FCRA provides for the disclosure of information to the FBI for “counterintelligence purposes,” see 15 U.S.C. § 1681u, and to other government agencies for “counterterrorism purposes,” see § 1681v. Presumably the information produced under these sections is broader than the information that the FCRA elsewhere authorizes consumer reporting agencies to furnish governmental agencies, see § 1681f, as disclosures under that section are “limited to his name, address, former addresses, places of employment, or former places of employment.”

The FCRA provides not only for administrative enforcement of its provisions, see 15 U.S.C. § 1681s, but it also provides for civil penalties in the event of willful or negligent noncompliance with its terms, see § 1681n and § 1681o, respectively, and sets forth criminal penalties for obtaining consumer information under false pretenses, § 1681q, or for the unauthorized disclosure of consumer information, § 1681r. (The statutes of limitation may be found in § 1681p.)