Tag Archives: FCRA

May 16, 2016

FCRA Lawsuit Sent Back To Ninth Circuit For Further Analysis on Standing to Sue

Lane_DBy Dora Lane

A bare procedural violation of the Fair Credit Reporting Act (FCRA) is not sufficient to permit an individual to sue for a willful FCRA violation, ruled the U.S. Supreme Court today. But, if the alleged procedural violation entails a risk of real harm, the plaintiff may have a concrete injury sufficient to have standing to sue. In a 6-to-2 decision, the Court sent the case back to the Ninth Circuit for further analysis of the injury-in-fact requirement of Article III standing. Spokeo, Inc. v. Robins, 578 U.S. ___ (2016).

People Search Engine Allegedly Produced False Information 

Spokeo, Inc. operates a website that provides users with information about other people, including contact data, marital status, age, occupation, economic health, hobbies, shopping habits, musical preferences, and wealth level. It collects that information from various sources including phone books, real estate listings, and social networks.

According to Thomas Robins' allegations, he found that Spokeo’s website published false information about him. It stated that he was married, in his fifties, had children, held a job, was relatively affluent, and had a graduate degree – none of which was accurate. Robins sought to file a class action against Spokeo, asking to recover the $1,000 in damages allowed by the FCRA for each willful violation of the statute. The potential class could include millions of people.

Ninth Circuit Reversed on Whether Actual Harm Needed for Willful FCRA Violations

The trial court focused on Robins’ allegations of harm, which were “that he has been unsuccessful in seeking employment, and that he is concerned that the inaccuracies in his report will affect his ability to obtain credit, employment, insurance, and the like.” It dismissed his complaint without prejudice, ruling he lacked standing to sue Spokeo because he had not alleged “any actual or imminent harm.” Despite filing an amended complaint in which he more fully described the inaccuracies in the information on Spokeo’s website, the district court ruled that Robins had failed to plead an injury-in-fact and that any injuries pled were not traceable to Spokeo’s alleged violations.

The Ninth Circuit Court of Appeals reversed. Spokeo had argued that Robins could not sue under the FCRA without showing actual harm, but the Ninth Circuit found that the FCRA does not require a showing of actual harm when a plaintiff sues for willful violations. Therefore, the Ninth Circuit held that a plaintiff can suffer a violation of the statutory right without suffering actual damages.

Injury-In-Fact Requires Concrete and Particularized Harm

The Supreme Court vacated the Ninth Circuit’s decision, stating that the appellate court had failed to consider both aspects of the injury-in-fact requirement for standing to sue, namely that the plaintiff suffered an invasion of a legally protected interest that is both concrete and particularized, rather than hypothetical. Justice Alito, writing for the majority, stated that the Ninth Circuit focused on the “particularized” aspect of Robins’ injury – in other words, that he had been affected in a personal and individual way – but failed to consider whether his injury was “concrete.” The Court emphasized that Article III standing requires a concrete injury, even in the context of a statutory violation.

The Court pointed out, however, that a concrete injury does not have to be tangible. An intangible harm may constitute an injury-in-fact and Congress can identify and elevate intangible harms to give rise to a case or controversy sufficient for standing to sue. A risk of real harm may satisfy the concreteness requirement.

As it relates to Robins’ allegations of Spokeo’s willful FCRA violations, the Court wrote that although Congress clearly sought to prevent the dissemination of false information by adopting the safeguards in the FCRA, Robins could not satisfy the injury-in-fact requirement for standing simply by alleging a bare procedural violation of the FCRA. The Court noted that a violation of one of the FCRA’s procedural requirements, such as providing an incorrect zip code, may not result in harm. The Court, without taking a position on whether the Ninth Circuit’s ultimate conclusion was correct, sent the case back to the Ninth Circuit to further analyze whether Robins’ particular procedural violations, as alleged, involve a degree of risk sufficient to meet the concreteness requirement.

Effect of Ruling

By remanding this case back to the appellate court, the Supreme Court may have muddied the waters for defendants who face a statutory violation of the FCRA (or other federal statutes). Although it is good news that a bare statutory violation without concrete harm will not be sufficient to confer standing to sue, the analysis of the injury-in-fact requirement will likely mean that most cases will not be dismissed early in the proceeding, say on a motion to dismiss. That will raise the cost of defending such cases. Today’s opinion also leaves the door open for Robins’ class action case to proceed, should the Ninth Circuit find that the plaintiffs’ face the risk of real harm from false information in Spokeo’s people search database. We will continue to follow the case as the liability for statutory violations of the FCRA in a class action is huge.

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November 12, 2015

Are Your Background Check Disclosure Forms FCRA-Compliant?

Wiletsky_MBy Mark Wiletsky

A rash of class action lawsuits is forcing employers to defend their background check disclosure and authorization forms. The current focus is on disclosure forms that include extraneous information. Here’s what you need to know to lessen your risk of a similar class action lawsuit.

FCRA Disclosure Requirement

If you obtain background check reports from a third party, such as a consumer reporting agency that provides employment-related screening services, you need to comply with the Fair Credit Reporting Act (FCRA). The FCRA, among other things, requires that employers disclose to applicants/employees that a consumer report may be obtained for employment purposes before requesting the report. Specifically, an employer or prospective employer must provide “a clear and conspicuous disclosure” in writing to the individual on whom the report is to be conducted and that disclosure must be “in a document that consists solely of the disclosure.”

It is this stand-alone disclosure requirement that is now the subject of many class action lawsuits. Applicants (and their class-action counsel) scrutinize the background check disclosure forms used by employers and if there is any extraneous information included on the form, they file a lawsuit alleging that the employer violated the FCRA by failing to provide a stand-alone disclosure. The applicants can allege a statutory FCRA violation without suffering any actual damages, seeking recovery of between $100 and $1,000 for each member of the class of applicants who were provided the same form. They also seek punitive damages for willful violations of the FCRA.

Extraneous Information on FCRA Forms

The text of the FCRA does not define what it means to be a “document that consists solely of the [required] disclosure.” It does, however, state that the required written authorization from the applicant/employee may be included with the disclosure. Consequently, employers may combine the FCRA disclosure with the authorization/consent requirement, but any other information on the form may jeopardize compliance.

As these cases proceed through the courts, judges have found certain types of additional information on the FCRA disclosure form to be problematic, including:

  • Imbedding the FCRA disclosure within a job application
  • Release of liability, e.g., “I hereby release [employer] and any of its authorized agents from liability”
  • Acknowledgement of no discrimination, e.g., “I fully understand that all employment decisions are based on legitimate non-discriminatory reasons”
  • Ramifications of falsified information, e.g., “I understand that submission of false information on this or any employment forms may result in non-selection or termination if hired”
  • State-specific notices, e.g., notices specific to California or New York applicants, etc.
  • Statements about how background information will be gathered and from which sources
  • Procedures for how to dispute information on the reports, including time frames for challenging the accuracy of any report
  • Name, address and contact information of the consumer reporting agency

In most cases, the courts have refused to dismiss these lawsuits at an early stage, allowing the class representatives to proceed with their allegations of FCRA violations based on these types of extraneous information in disclosure forms. It is unclear whether a judge or jury will ultimately conclude that an FCRA violation exists in these cases, but the affected employers face significant risk of liability as well as the time, expense and public notoriety related to defending these actions in court.

Don’t Rely On Your Screener 

If you think you are out of danger because you rely on FCRA forms provided by your background screening company, think again. Consider the recent class action filed against Big Lots in Philadelphia. The national chain of retail stores used a “Consent to Request Consumer Report & Investigative Consumer Report Information” form provided by its background check provider, Sterling Infosystems, that did not contain the required disclosure language. Instead, the form included allegedly extraneous information, including an implied liability waiver, a full page of state-specific notices, and information about how background information will be gathered and how disputed information may be challenged.

The class action seeks to hold Big Lots liable for its alleged violation of its FCRA disclosure obligations, and it will be up to Big Lots to try to hold Sterling Infosystems liable for providing non-compliant forms. However, because many background screening providers limit their liability in their service contracts, sometimes to only two or three months’ worth of screening costs, you may be left without much recourse.

Review Your FCRA Forms

Take the time to review your background check disclosure and authorization forms now. Make sure your FCRA disclosure and authorization is not imbedded or buried in your employment application. If your disclosure forms include extraneous statements, such as liability waivers, state-specific disclosures, or other background check procedures, your forms may not meet the FCRA requirement to be a stand-alone disclosure. Consider removing the extra wording from the FCRA disclosure forms and move them to a different, non-FCRA-related document. These sorts of class actions can be easy pickings, so taking action now will go a long way toward avoiding being hauled into court.

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