OVERVIEW OF FAIR CREDIT REPORTING ACT AND CASE LAW UPDATE

There has been a consistent increase in Fair Credit Reporting Act (“FCRA”) litigation in recent years despite an overall decline in lawsuits filed pursuant to other consumer protection statutes. Most consumer protection counsel will frequently find themselves handling an FCRA claim or being asked whether one exists. This paper provides an overview of the FCRA along with recent trends and theories of liability under the statute. It begins with a discussion of the origin of the FCRA and its key amendments, includes a review of the most frequently cited provisions under the statute, and concludes with a case law update.

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The Supreme Court has decided to hear a case challenging the constitutionality of the structure of the Consumer Financial Protection Bureau (“CFPB”). The CFPB was created in 2010 under the Dodd-Frank Act, which provided that the director of the CFPB could be removed by the president for good cause. The petitioner in Seila Law, a debt resolution law firm, objected to a demand from the CFPB for documents and information regarding the firm, on the grounds that the CFPB’s structure is unconstitutional. The case made its way from the Central District of California through the Ninth Circuit Court of Appeals, which found that the CFPB’s structure is constitutionally permissible. Consumer Financial Protection Bureau v. Seila Law LLC, 923 F.3d 680, 682-84 (9th Cir. 2019). The petition for writ of certiorari was granted in October of 2019.

Interestingly, the CFPB took the position in its brief on the petition for writ of certiorari that its single-director structure is, in fact, unconstitutional. CFPB Director Kathleen Kraninger outlined this position in a letter to Senate Majority Leader Mitch McConnell, arguing that the unconstitutionality of the for-cause removal provision does not affect the statutory responsibilities of the CFPB or its ability to remain fully operative. In taking up this issue, the Supreme Court will consider whether the structure of the CFPB violates the separation of powers, and if so, whether 12 U.S.C. § 5491(c)(3), establishing the CFPB, can be severed from the Dodd-Frank Act.

Denise Miller v. Trident Asset Mgmt., LLC., et al.; No. 1:18-cv-02538-ADC (Dec. 4, 2019) (Order Granting Defendant’s Motion for Sanctions)

In a scathing opinion, the District of Maryland recently awarded attorneys’ fees and costs to Defendant Trident Asset Management for having to defend what it characterized as “Plaintiff’s fraud upon this Court.” Denise Miller v. Trident Asset Mgmt., LLC., et al.; No. ADC-18-2538, Dkt. 168 at *3. In Miller, a consumer alleged a Verizon account was opened without her authorization or knowledge. Id. at *1. The Verizon account ultimately was charged off, with the outstanding $190 balance sent to Trident for collection, who thereafter began reporting the account on Plaintiff’s credit files. Id. Plaintiff disputed the reporting with the national consumer reporting agencies, repeatedly claiming the account was the product of fraud. Id.

In its Order, the Court vehemently rebuked Plaintiff’s actions, her paralegal’s actions, and her attorney’s actions. Id. at *3. “It would also be imprudent to ignore the role of counsel in this case, who even after being faced with his client’s admission of the debt, the false reporting of identity theft, and her lack of knowledge of whether the reporting was accurate, continued to press the litigation.” Id. at *4. Equally as concerning was the court’s emphasis on the behavior of Miller’s paralegal, Thomas Alston, whom also happens to be Ms. Miller’s landlord. Id. at *3. “‘[T]he Alston family is engaged in, and profiting from, an enterprise of [FCRA] litigation.’” Id. at *4 (quoting Alston v. Branch Banking & Trust Co., 1:15-cv-3100-GLH, 2016 WL 4521651, at *1 n.1 (D. Md. Aug. 26, 2016) (internal citation omitted).

The Miller decision serves as an important reminder ─ the Fair Credit Reporting Act, while an important vehicle to correct actual errors in consumers’ credit reports, is not to be used as a mechanism for greed by bringing frivolous, fraudulent lawsuits.