California Appeals Court Offers Greater Ability to Defend Against FCRA Claims

July 14, 2023

A California appeals court has made a significant decision. This decision favored the defense in a case centered upon a technical claim involving the Fair Credit Reporting Act (FCRA). 

The Fifth Appellate District found that the FCRA does not confer standing on a plaintiff, allowing them to sue in a California state court. However, this decision applies only without allegations of concrete injury. The plaintiffs petitioned the California Supreme Court for a review of their case and the depublication of the decision. However, the court rejected both requests.

In the suit, one plaintiff claimed the defendant violated the FCRA, which requires employers to provide clear and conspicuous disclosures. In addition, the disclosure must stand alone. The plaintiff alleged that the extraneous information included state disclosures and a liability clause. He also claimed that the disclosure confused him about his rights under the FCRA.

The Fifth Appellate District stated that the California Legislature could confer standing on a class of persons whether they have suffered an injury. Concrete injuries may prove necessary in the absence of a statutory right. In addition, lacking significant injury that establishes an interest in the case can lead to a plaintiff’s lack of standing. As such, the plaintiff would lack relevant issues or facts.

The Fifth Appellate District also clarified a regulation regarding the FCRA. It stated that plaintiffs must show they have a beneficial interest and have suffered an actual injury. These requirements give plaintiffs standing, allowing the FCRA’s provisions for statutory damages to compensate them for injuries suffered. 

The FCRA intends to remedy situations where quantifying or proving damages could prove challenging due to a decision. The court said the FCRA neither punishes violating companies nor confers public interest standing on a plaintiff. Instead, it gives authority to federal and state agencies and officials but not to private litigants. It does this to support the public’s interests in ensuring compliance.

The court determined that the plaintiff did not experience a significant enough injury to file a lawsuit. It based this decision on the alleged technical violations of the background check disclosure requirements outlined in the FCRA. According to California law, informational injuries not resulting in negative consequences do not grant individuals the right to sue under the FCRA.

Businesses may experience fewer suits concerning FCRA cases over informational injuries that lack actual damage. However, businesses must continue complying with the FCRA, as penalties can prove significant when actual harm occurs. The best way to comply with the FCRA during hiring is to partner with an experienced background check company.

JDP can help your company stay in compliance with these new guidelines. Contact a sales rep today.