Home > Uncategorized > Can a consumer waive his FCRA rights?

Can a consumer waive his FCRA rights?

January 7, 2011

The FCRA is structured to encourage consumers to hold consumer reporting agencies accountable for errors in consumer reports.  If the FCRA did not exist, consumers whose reports were inaccurate might want to sue, but they wouldn’t have much incentive to do so:  most FCRA cases seek damages in the thousands (as opposed to tens or hundreds of thousands) of dollars.  By imposing statutory damages for some violations, and by throwing in attorney fees as damages in any successful suit, the FCRA encourages to consumers to file lawsuits.  That doesn’t make my clients very happy, but it helps keep me off the streets.

It also raises this question:  should a consumer be permitted to waive the rights that the FCRA provides?  Some credit/employment/rental applications include clauses in which the applicant waives the right to sue for inaccurate background data in a consumer report.  Could a credit bureau enforce such a clause in court?

My research suggests that this issue has come up only once in a reported decision.  Lane-Detman v. Miller & Martin, 82 S.W.3d 284 (Tenn. Ct. App. 2002).   Martin is not a typical FCRA case:  the plaintiffs there were not consumers, but investors who hired an attorney to perform a background check, which he farmed out to Equifax.  The contract between the lawyer and Equifax included an exclupatory clause that protected Equifax, and the trial court found (and the appeals court affirmed) that the clause protected Equifax against a suit by the investors.

In discussion, the appellate court stated the law as it appears to apply in most states:  courts will enforce most exculpatory clauses most of the time, but they will NOT do so if enforcement would harm the “public interest.”  Obviously that leaves a great deal of room for judicial discretion:  some courts could define “public interest” awfully broadly.

Some states (not all) use a six-factor test to inform judges’ discretion, which suggests that an exculpatory clause is against the public interest if it: (1) involves a regulated industry; (2) that provides a valuable public service; (3) to any member of the public; such that the party whom the clause benefits (4) has a decisive advantage in negotiations; (5) presents contracts of adhesion; and (6) makes the persons or property of those who request the service subject to the risk of the exculpated party’s negligence.

As written, those factors would seem to suggest that an exculpatory clause in favor of credit bureaus would harm the public interest.  But would that always be true?  I’ve been doing FCRA defense work long enough to know that some consumers (and some lawyers) will file quick-strike lawsuits against dozens of defendants (e.g., every creditor listed on a credit report) or against the same defendant multiple times.  Fighting these lawsuits is expensive, so defendants will often settle.  But if a plaintiff (or lawyer) gets enough small settlements, he or she can do very well.  Surely these consumers can waive their FCRA rights without harming the public interest.  Right?

Maybe judicial discretion isn’t such a bad thing after all.

Categories: Uncategorized
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