Supreme Court Archives - JDP

Federal Government Liable for FCRA Violations by Supreme Court

marymae — Fri, 16 Feb 2024 14:17:09 +0000

Feb 16, 2024

In a unanimous decision, the U.S. Supreme Court announced its ruling on a Fair Credit Reporting Act (FCRA) case. This ruling allows individuals to sue the federal government for violations of the Fair Credit Reporting Act (FCRA) 15 U.S.C. § 1681. This decision may lead to an uptick in lawsuits against the federal government for FCRA violations.

The Case

The case that started this concerns an individual who received a loan from a division of the U.S. Department of Agriculture (USDA). According to the allegations, the plaintiff acquired and repaid a loan from the USDA. Despite the repayment, the USDA reported the loan as overdue. This action damaged the plaintiff’s credit score and ability to acquire loans at affordable rates.

The plaintiff reported the issue to a consumer reporting agency, which notified the USDA. The USDA failed to take “any action to investigate or correct” the problem. The plaintiff filed this lawsuit in answer, alleging that the USDA violated the FCRA. However, the USDA moved for dismissal by claiming sovereign immunity. The U.S. District Court for the Eastern District of Pennsylvania agreed and dismissed the lawsuit.

The Appeal

The Court of Appeals for the Third Circuit reversed this ruling after a request for appeal. According to the Court, the FCRA authorizes lawsuits to recover damages against “any person” for related violations. Among the many definitions of “person,” the FCRA includes “[any] governmental agency.”

The USDA requested a review of the decision with the Supreme Court. Granting it, the Supreme Court sought to resolve the conflicts between Circuits. Both parties agreed that the government generally possesses sovereign immunity. However, they disagreed about whether the FCRA waived this immunity. As such, the Supreme Court applied a “clear statement” rule to determine whether Congress expressly waived its immunity. This ruling allows for lawsuits when “the language of the statute [is] unmistakably clear.”

The Supreme Court Opinion

The Supreme Court found that the law provides this clear statement, waiving the federal government’s immunity. They based it on the definitions including “any governmental agency” and accompanying legislative text reaffirming this conclusion. Thus, the Court affirmed the Third Circuit’s ruling. According to the Court’s Opinion:

“The Executive Branch may question the wisdom of holding federal agencies accountable for their violations of the Fair Credit Reporting Act; certainly, the many and resourceful arguments it advances today suggest as much. But Congress’s judgment commands our respect, and the law it has adopted speaks clearly: A consumer may sue ‘any’ federal agency for defying the law’s terms.”

As of this ruling, consumers can now sue the federal government for certain violations of the FCRA. This clearly illustrates the importance of compliance with the FCRA’s provisions, especially for employers regarding background checks and other consumer reports.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

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Supreme Court to Decide if CFPB Funding Violates Appropriations Clause

naomioverstreet — Tue, 17 Oct 2023 19:15:51 +0000

Supreme Court to Decide if CFPB Funding Violates Appropriations Clause

October 17, 2023

The Supreme Court of the United States (SCOTUS) could determine the fate of the Consumer Financial Protection Bureau (CFPB) in a recent case. This hearing centers upon the argument of whether the funding of the CFPB violates the U.S. Constitution, specifically Article 1, Section 9.

The Supreme Court justices differed in their opinions while listening to the arguments. Both sides argued the constitutionality of Congress’s decision to fund the CFPB. According to the decision, the Federal Reserve would fund the CFPB instead of using the annual appropriations process. Initially, a federal appeals court in Texas heard this case.

Court’s Decision

This court decided that the CFPB’s funding structure violated Article 1, Section 9 of the Constitution. This article and section are better known as the appropriations clause. It prohibits the withdrawal of money from the treasury without appropriations by law. As such, the question is whether the CFPB receives funding that violates the appropriations clause. After hearing the arguments, it remains uncertain how the Supreme Court will rule this case.

The case started in 2017 when two industry groups decided to challenge a rule that regulated payday lenders. The U.S. Court of Appeals Fifth Circuit rejected the group’s challenge to the rule’s substance. However, the judges agreed with the group’s view about whether the CFPB’s funding violated the appropriations clause.

Congress created the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. It began operating on July 21, 2011. The Bureau is an independent bureau of the Federal Reserve System.

The CFPB “implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive.” As such, the Bureau does have the right to take action against businesses that violate consumer financial laws. This right also includes the Fair Credit Reporting Act (FCRA). This Act covers background checks, the privacy of consumers’ information in reports, and the accuracy of the information supplied by consumer reporting agencies.

The Supreme Court’s decision may change how the CFPB receives its funding. Regardless of how that changes, the CFPB will continue monitoring employers’ compliance with the FCRA and other regulations. As such, businesses must comply with background-checking regulations, including adverse action-based decisions. One way is by partnering with a trusted background screening provider. The right partner keeps employers updated and adjusts the reports accordingly.

Keep your business compliant with new laws and regulations with JDP’s reliable background checks. Contact a sales rep today.

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Supreme Court to Hear Arguments on Knowledge Requirement of FCA and FCRA

ahmadkhan — Thu, 13 Apr 2023 13:00:18 +0000

The US Supreme Court will hear oral arguments in two important cases in April, involving the interpretation of a crucial element of the False Claims Act (FCA) and the Fair Credit Reporting Act (FCRA). In hearing these cases, the Court will consider the knowledge requirement of the FCA. In addition, the Court will decide whether a defendant’s belief of performing legal conduct proves pertinent to determining whether they deliberately violated the False Claims Act.

The central issue of the cases is the knowledge requirement of the FCA, and whether a defendant’s belief in the lawfulness of their conduct is legally relevant to whether they “knowingly” violated the FCA. The question before the Court is whether the “objective knowledge standard” from Safeco Insurance Co. v. Burr case regarding FCRA violations applies to the FCA’s explicit knowledge requirement in cases where the purported falsity of a claim turns on an ambiguous legal obligation.

In the Safeco case, the Court used long-standing common law principles. As such, it confirmed the case concerned FCRA violations. The results led to “reckless disregard,” equating to “willfulness.” The lawsuit also noted that the existence of infringements had a contextually driven matter.

However, the Safeco case concerned violations of the FCRA, not the FCA and statutory construction. The FCRA does not contain an explicit knowledge requirement, whereas the FCA does. For example, FCRA matters to consider the defendant’s knowledge when deciding whether they willfully violated the Act. As such, questions have surfaced about whether the Safeco case holds relevant precedent in a knowledge determination following the specific terms of the FCA.

Though the FCA and FCRA have knowledge requirements for claims, they employ different enforcement standards. For example, a government-initiated FCA enforcement generally has criminal and civil facets. They also often charge false claims under several statutes, increasing potential sanctions and motivating defendants to settle quickly.

The government may apply sanctions in most criminal cases. However, these typically require a culpable state of mind for the government to prove a criminal violation. In FCA cases, it is only necessary for the individual to know of the claim’s falsity, meaning they knowingly made a false claim. In such situations, the FCA defines “knowingly” as:

Clear knowledge of the claim being false
Intentional ignorance of falsity
Maintaining a claim with “reckless disregard.”

In many cases, the government has proven less than consistent with the standard for the knowledge requirement. Therefore, some courts have used the Safeco standard. Correspondingly, the circuits using this standard have used it consistently. Unfortunately, this does not help the businesses that operate in different circuits. However, once the Supreme Court makes a decision on this issue, this may change.

The recent Supreme Court case on the knowledge requirement of the FCA and FCRA highlights the complexity of federal regulations, particularly those related to FCRA regulations for background checks. Non-compliance with these requirements can result in significant penalties. To ensure compliance, it is advisable to partner with a reputable background check company with in-depth knowledge of federal and local requirements. By doing so, you can obtain high-quality results for your company while avoiding costly mistakes.

Disclaimer:

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.

The post Supreme Court to Hear Arguments on Knowledge Requirement of FCA and FCRA appeared first on JDP.