Home > Uncategorized > The FCRA and strict liability: an historical study

The FCRA and strict liability: an historical study

September 2, 2011

The FCRA’s provision at 15 USC 1681e(b) states that every consumer reporting agency (“CRA”) must “follow reasonable procedures to assure maximum possible accuracy”  of the information in a consumer report.  The federal courts were quick to note that “maximum possible accuracy” is not “complete accuracy.”  In other words, CRAs are not “strictly liable” or automatically forced to compensate a consumer if a report contains inaccurate information about him or her.  Rather, CRAs are only liable if their failure to “follow reasonable procedures” caused a meaningful inaccuracy.

Inspired by a recent post that discussed how a circuit court’s overstated summary of a district court’s holding could lead to mischief in later litigation, I thought I’d take a moment this week and trace how the courts came to adopt the proposition, now widely held, that the FCRA does not impose strict liability on CRAs.  While it’s a relatively clear proposition if you look at the statutory language, it’s not widely known among consumers or even lawyers.  So maybe it’s worth discussing.

As far as I can tell, the first case to hold that the FCRA is not a strict liability statute is Peller v. Retail Credit Co., Civ. No. 17900, slip op. at 4 (N.D. Ga. Dec. 6, 1973).  But Peller was not published in 1973 and has not since been picked up by LEXIS.

So the first available case on FCRA strict liability is Austin v. Bankamerica Service Corp., 419 F. Supp. 730 (N.D. Ga. 1974), which follows Peller.  The Peller and Austin courts published their opinions soon after the FCRA went into effect.*  The court found that defendant Atlanta Credit Bureau created a credit report about plaintiff Willie Lee Austin which stated, correctly, that Mr. Austin was a defendant in a lawsuit.  But the report did not indicate which court the lawsuit was in, or that Mr. Austin was being sued in his official capacity (as Deputy Marshal for DeKalb County, Georgia) and not personally.  The question was whether Mr. Austin had a claim against the bureau for failing to include these details in its report.

The Austin court held that Mr. Austin had no claim because the bureau’s report was accurate as far as it went.  The court reasoned:

“If this Court were to require Credit Bureau of Atlanta to ascertain the nature of a defendant’s capacity in a lawsuit it would be tantamount to requiring consumer credit reporting agencies to evaluate the litigation; whether it is merely for injunctive relief or for damages, the amount of damages recoverable against any particular defendant, or the probability of success in a lawsuit against a particular defendant. Requiring such an evaluation would, in this Court’s opinion, force compliance beyond the intended scope of the Act.  Although the Fair Credit Reporting Act clearly requires consumer reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of the information,” the Act does not impose a strict civil liability for an agency’s inaccuracy or incompleteness in a report. ”

419 F. Supp. at 733 (emphasis added).

The Austin court’s holding was quickly picked up and spread among the various circuit courts.  See Hauser v. Equifax, Inc., 602 F.2d 811, 814 (8th Cir. 1979) (following Austin) (“[T]he Act does not render consumer reporting agencies strictly liable for inaccuracies in a report …. There must be a showing that the inaccuracy resulted from the agency’s failure to ‘follow reasonable procedures to assure maximum possible accuracy'”); see also Cahlin v. General Motors Acceptance Corp., 936 F.2d 1151, 1156 (11th Cir. 1991) (following Hauser) (“The Act, however, does not make reporting agencies strictly liable for all inaccuracies”); Bryant v. TRW, Inc., 689 F.2d 72, 78 (6th Cir. 1982) (also following Hauser) (“It is clear, as defendant contends, that liability does not flow automatically from the fact that a credit reporting agency, such as defendant, reports inaccurate information”).

The Peller decision was also followed on a parallel track by Thompson v. San Antonio Retail Merchants Ass’n, 682 F.2d 509, 513 (5th Cir. 1982) (“Section 1681e(b) does not impose strict liability for any inaccurate credit report, but only a duty of reasonable care in preparation of the report”) (following Lowry v. Credit Bureau, Inc. of Georgia, 444 F. Supp. 541, 544 (N.D.Ga.1978) (following Peller)).

I’ll dig into some of these circuit court opinions in future weeks.  While they all agree that the FCRA is not a strict liability statute, they don’t agree on what a defendant must do to demonstrate compliance with 15 USC 1681e(b).

*  For the record:  the statutory history of 15 USC 1681, the FCRA’s preamble, explains that the FCRA was enacted on October 26, 1970 and went into effect 180 days later, or on April 24, 1971.  The Austin case is thus one of the earliest FCRA cases.

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