Your clients’ consumer rights legal issues may be hiding in plain sight

Having practiced consumer rights law for more than two decades, it’s not unusual for other lawyers to tell me they have no idea what consumer rights law is, and that they highly doubt their clients have legal issues that would fall under the consumer rights umbrella.

But ignorance is not bliss, especially when it comes to legal issues lawyers don’t know their clients are facing.

Consumer rights legal issues, such as those arising under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681, are hiding in plain sight and affect millions of people—including your clients. There is a good chance your clients have consumer rights legal issues on top of whatever legal issues they initially came to you about. And there’s an even better chance that you and your colleagues have no idea your clients are wrestling with consumer rights legal issues. If you don’t know your clients are wrestling with these issues, you cannot help your clients resolve them.

While the damage done by conduct prohibited by the FCRA and other consumer protection statutes impacts the lives of people across all demographics and socioeconomic factors, certain segments of the population take the brunt of this wrongdoing. For example, in November 2021, the Consumer Financial Protection Bureau released research findings that showed consumers residing in majority Black areas were more than twice as likely to have to dispute inaccuracies on their credit reports (a right given to them by the FCRA) than consumers residing in majority white areas.

There is a mismatch between the consumer rights legal issues many consumers need help with and the lack of awareness about those issues many lawyers have, particularly legal issues governed by the FCRA. To help eliminate that mismatch, I will walk through four common fact patterns that might give rise to claims under the FCRA—claims that most lawyers have no idea their clients might have.

An FCRA primer

Before I dive into those fact patterns, I would be remiss if I did not lay some groundwork about the FCRA itself.

In drafting the FCRA, Congress found that “inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system.” It also found that “there is a need to [e]nsure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.”

According to Congress, the purpose of the FCRA is 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” in accordance with the statute.

Signed into law by President Richard Nixon on October 26, 1970, the FCRA regulates consumer reporting agencies, users of consumer reports, and entities that furnish consumer information.

The statute defines a “consumer reporting agency” (“CRA”) as a person or organization “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.” The “Big 3” CRAs are Equifax, Experian, and TransUnion, but background check companies are also considered CRAs. Under the FCRA, a “consumer report” includes reports like traditional credit reports, as well as employment background checks and tenant screening checks requested by would-be landlords.

The FCRA established a number of rights for us Americans regarding consumer reports, including:

• The right to be notified if a consumer report has been used against us;
• The right to receive a copy of our consumer report;
• The right to receive free consumer reports every year;
• The right to ask for our credit score;
• The right to dispute errors on our consumer reports;
• The right to have inaccuracies corrected or removed;
• The right to have outdated negative information removed from consumer reports;
• The right to restrict access to information in consumer reports to those people and entities with a legitimate need;
• The right to require employers to receive consent before accessing our consumer report; and
• The right to seek damages from entities that violate the FCRA.

When a consumer can show that an entity willfully violated the FCRA, the consumer is entitled to statutory damages, actual damages, punitive damages, and attorneys’ fees. If a consumer can show that an entity only negligently violated the FCRA, the consumer can recover actual damages and attorneys’ fees.

Four common FCRA legal claims that may be hiding in plain sight

Today, consumer reports in the form of traditional credit reports or otherwise are widely used by companies across the commercial spectrum for a myriad of reasons. Because the use of consumer reports is so prevalent, there’s a good chance your clients have had a recent interaction with a third party involving their consumer report that might give rise to a claim under the FCRA. The only problem is that neither they nor you know it.

With that in mind, here are four common scenarios in which your clients might have FCRA claims.

1. Your client’s credit report falsely claims they defaulted on a loan. They actually paid it off in full two months early.

In this scenario, under the FCRA, your client may have a claim against both the CRA and the creditor that supplied the information about the loan.

Your client’s first order of business would be to file a dispute with the CRA that provided the credit report. Both the CRA and the creditor must then conduct a reasonable investigation, must respond to your client about the result of that investigation within 30 days, and must correct the error if it is an error. If either or both fail to do so, your client can bring suit against them under the FCRA.

2. Your client’s job application was rejected based on a background report claiming they were convicted of a felony three years ago. Your client did not receive notice of that rejection before it occurred. Your client has no criminal record. The company conducting the background check wrongly included criminal records from someone with a similar name to your client’s.

As I mentioned earlier, background checks are consumer reports under the FCRA. The error here is known as a “mixed file” because the company conducting the background check mixed someone else’s criminal history with your client’s.

Your client can sue the background check company under the FCRA for mixing their file with another individual’s—without having to first dispute the error.

On top of a claim against the background check company, your client might also have a claim against the employer.

Under the FCRA, an employer who is planning on rejecting a job application, reassigning or firing an employee, denying an employee’s promotion, or taking any other adverse employment action based on information in a consumer report, must first give the applicant or the employee (i) notice of that forthcoming adverse action, including a copy of the consumer report the employer is relying on, and (ii) a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” which should have been provided to the employer by the company that furnished the report.

The failure on the employer’s part to provide your client this notice and documentation before taking the adverse action gives your client an actionable claim under the FCRA against the employer.

3. Your client was denied a new apartment based on a tenant screening report claiming they were convicted of a felony 18 months ago. That charge was in fact dropped, and your client pled to a misdemeanor.

This is an example of a “failure to update” claim under the FCRA. These claims often arise in the context of criminal charges on background checks because many background check companies infrequently update the proprietary records they create after accessing public court records.

In this instance, your client may have a claim under the FCRA against the company that created the background check. Your client can sue the company directly without first disputing the error.

4. Your client was denied life insurance based on a consumer report that contained false information about your client’s medical and prescription history.

Consumer rights law firms are seeing more life insurance companies request applicants’ consumer reports containing medical and prescription histories in order to determine whether they should insure those applicants. As you might have guessed, those reports frequently contain errors.

If your client is denied life insurance due to inaccurate contents of a consumer report, they can bring a suit under the FCRA against the company that provided the background check—and can do so without first disputing the error.

Going above and beyond for your clients by tackling consumer rights legal issues

Your clients almost certainly did not come to you for help with consumer rights legal issues, but there’s a good chance they’re wrestling with them. Armed with knowledge about these four common FCRA claims hiding in plain sight, you may now be able to determine at a high level whether a particular client could in fact have a colorable consumer rights legal claim.

If they do, you can further strengthen your relationship with that client by helping them resolve their previously undiagnosed legal issue with the help of knowledgeable co-counsel, or by referring them to a consumer rights lawyer in your personal or professional network.

Mark D. Mailman is a founding partner of Center City-based Francis Mailman Soumilas, P.C., a leading consumer rights law firm. He can be reached at mmailman@consumerlawfirm.com.

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Reprinted with permission from the December 30, 2021 edition of The Legal Intelligencer © 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.