SCOTUS to Determine Whether FCRA Holds Government Liable for Violations
November 8, 2023
The U.S. Supreme Court has received the task to consider whether the Fair Credit Reporting Act (FCRA) can hold public agencies liable for violations. According to the case, the question will focus on defining a “person.” The determination will clarify whether the federal law explicitly waiving the government’s sovereign immunity applies.
This case began as a typical consumer dispute. In it, the aggrieved alleged that the lender provided erroneous information. The lender in question was the U.S. Department of Agriculture (USDA). The plaintiff explained that the problem concerned a loan he received from the Rural Housing Service, an agency under the USDA.
The plaintiff claimed that he repaid this loan in full. However, his credit report continued showing outstanding past-due payments. The plaintiff disputed this error with a consumer reporting agency, which forwarded the dispute to the lender. When the information did not change, he filed a lawsuit alleging violations of the FCRA.
The USDA promptly filed a motion to dismiss. According to the USDA, the agency did not qualify as a “person” under the FCRA. Thus, the USDA claimed immunity from liability. The district court found that the FCRA did not explicitly waive this right and granted the motion for dismissal. However, the plaintiff appealed this ruling, which the Third Circuit reversed.
According to the Third Circuit, the government “unambiguously” waived its right to immunity in the text, which defines a “person” to include a “government or governmental subdivision or agency.” Congress amended the FCRA in 1996, expanding it to include “any person” who furnished information to consumer reporting agencies instead of only the agencies themselves. However, it did not change the definition of a person. It has been the same since 1970 and includes government agencies.
Though the language in the statute is clear, there is case history favoring the argument that the government holds sovereign immunity. This history also reveals a circuit split on the issue. The USDA requested the Supreme Court to overrule the Third Circuit’s decision to resolve this split.
As such, the Supreme Court has agreed to take up the case and review the arguments. However, businesses and many other organizations do not have immunity. They must comply with the FCRA and other applicable laws when handling credit and background check reports. As such, companies should consider working with a trustworthy background-check company. The right partner will ensure they comply with all relative regulations while delivering accurate and timely reports.
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