Archive for April, 2011

As criminal background reports become more common, so too do FCRA lawsuits about them

April 29, 2011 Leave a comment

The New York Times notes that more employers than ever are screening potential employees by obtaining criminal background reports about them.  Employers are doing this because such reports are relatively easy to obtain – where they once required a trip to a courthouse, they can now be ordered online.  Advocates for people with criminal records don’t like the way these reports are becoming more common, and the article explains their concerns, noting that FCRA suits are one way to resolve them.

All in all, the article does a decent job of summarizing a growing aspect of FCRA litigation.  Read it here:

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The FCRA will preempt state law claims, like it or not, noisily or silently

April 21, 2011 Leave a comment

Much ink has been and will be spilled over the two – count them, two – preemption provisions in the FCRA.  One of them is at 15 USC 1681h(e) and the other is at 1681t(b).  Neither of them preempts all state laws pertaining to credit reports, which is why the ink gets spilled.

One issue that comes up from time to time is whether common law claims for, say, negligence are preempted by the FCRA.  The answer is “usually” – common law claims “in the nature of defamation, invasion of privacy, or negligence” are preempted unless the defendant acted “with malice or willful intent to injure.”

The typical way that state-law claims get raised in under the FCRA is as sort of “what if” claims.  The plaintiff’s lawyer thinks, “What if the defendant acted with malice or willful intent to injure?  Wouldn’t it be nice to get punitive damages?  I think that in my complaint alleging FCRA violations, I will also allege a common law gross negligence claim on the basis of malice, and just hope that something good comes up in discovery.”  Usually, nothing good comes up in discovery, and the claims get dismissed.  I think of this as “noisy preemption” in that the FCRA claim is being litigated and it is therefore obvious that the case involves the FCRA.

But there’s another possible scenario.  For any number of reasons, a plaintiff may want to file a standard negligence claim related to a consumer report in state court, FCRA preemption be damned.  Sometimes state courts are friendlier to plaintiffs.  Sometimes the plaintiff’s lawyer may be more familiar with state court procedures – or may think that the defendants’ lawyers are unfamiliar with them.  So the question is:  could a consumer file a lawsuit in state court alleging a common law claim involving a consumer report … and just not mention the FCRA?  If so, would the claim still be preempted?

The District of New Jersey recently found that the answer to this question is “yes.”  The FCRA will preempt a common law cause of action under 1681h(e) whether or not the plaintiff mentions the FCRA in his or her complaint.  Burrell v. DFS Services, LLC, No. 10-2706, 2011 U.S. Dist. LEXIS 21408 (D.N.J. Mar. 3, 2011).  In Burrell, the issue was obvious – the plaintiff filed a complaint that mentioned the FCRA and then tried to file an amended complaint that didn’t.  But the court’s reasoning should apply even if the plaintiff’s first complaint fails to mention the FCRA.  This is “silent” preemption.  You can’t escape the FCRA.

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Accurate consumer reports can still lead to litigation? So says the EEOC.

April 8, 2011 1 comment

For most of my time as an FCRA defense lawyer, the cases I’ve seen have alleged that the plaintiff-consumer lost access to credit, or had to pay more for credit, because of some error in a consumer report.  But in the past 18 months or so, I’ve seen more cases (and been asked to handle more cases), in which the plaintiff alleges that he or she lost a job, or failed to get a job offer, because of a consumer report.

It’s not surprising that, as more businesses use consumer reports to check current or putative employees, more lawsuits are being filed to challenge such use.  What is surprising – at least to me – is that the EEOC has sued Kaplan, Inc. (the test-prep people), alleging that Kaplan’s use of consumer reports to determine which employees to hire has a disparate impact on minorities and is therefore illegal even if the reports are accurate:

Again, the EEOC makes no allegation (at least none that I can see) that the consumer reports that Kaplan uses are inaccurate.  Rather, the EEOC’s claim appears to be that:  a) African-Americans tend to have worse credit and therefore worse consumer reports than others do; so that b) African-Americans are disproportionately likely to have their job applications declined if an employer uses consumer reports; which is unjust because c) an accurate report is not a good indicator of whether a person will be a good employee.

I suspect that allegations a) and b) are correct and that c) is very debatable.  But for me, what’s interesting is the notion that using even a perfectly accurate consumer report can get an employer in trouble.

, with my work schedule,
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When is a state law inconsistent with the FCRA?

April 1, 2011 Leave a comment

The FCRA pre-empts state laws on consumer reports … some of the time.  The main pre-emption provision is at 15 U.S.C. Sec. 1861t(a).  It says that the FCRA does not pre-empt all state laws in the field, unless they are “inconsistent” with the FCRA or are specifically pre-empted.  There’s a list of specific pre-emptions at 15 U.S.C. Sec. 1681t(b).  And don’t forget that some common law claims are sometimes pre-empted under 15 U.S.C. Sec. 1681h(e).

This blog post is about how to tell when a state law is “inconsistent” with the FCRA such that it is pre-empted by the FCRA.  I think there are two ways to look at it, and I’ve seen a hint of case law for one of them.

The first way, supported by case law, suggests that the FCRA is a ceiling but not a floor.  In other words, the FCRA sets minimum standards, but the states can exceed them and impose even stricter standards.  For example, 1681c(a)(3) prohibits paid tax liens from being reported for more than seven years.  Suppose that a state wanted to go even further and prohibit such liens from being reported for more than three years.  Under this first approach, the state could do so, because it is simply providing additional consumer protections over and above what the FCRA – itself a consumer protection statute – provides.  The case (that’s singular; I haven’t found any others) supporting this view is Credit Data of Arizona, Inc. v. State of Arizona, 602 F.2d 195 (9th Cir. 1979).  In it, plaintiff-appellant Credit Data wanted to charge a fee for consumer disclosures as permitted by 1681j, but Arizona law forbade any fee from being charged.  Credit Data thought the Arizona law was “inconsistent” with the FCRA, but the Ninth Circuit applied the “ceiling not a floor” approach and found for Arizona.

Of course, we all know that the Ninth Circuit is always wrong.  The other approach to determining whether something is “inconsistent” is to argue that if federal law and state law provide two different rules on the same topic, the federal law applies and the state law is pre-empted.  Under my analogy above, rather than having states set varying timelines on how long a paid tax lien could be reported – some might say two years, others four, others ten – this second approach would say that there is only one standard – seven years per 1681c(a)(3) – and every other standard is “inconsistent” and so pre-empted.

The second approach doesn’t seem to have been taken up and applied by any court, but I think that’s because decisions in this area are relatively rare.  Most of the time, it appears that states are comfortable letting the FCRA take the lead on consumer reports.  And when the states do get out in front, the FCRA will sometimes adapt and catch up – as it did with identity theft concerns in the FACTA amendments of 2001.

If anybody reading this knows of cases that favored one of the two approaches just discussed, or some crazed third approach that I didn’t consider, please let me know.

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