Fair Credit Reporting Act: Notice Requirement
In this case, the United States Court of Appeals for the Ninth Circuit held that consumers who were quoted higher insurance premiums after insurance companies reviewed their credit scores could pursue lawsuits against the companies for "willful" violation of the Fair Credit Reporting Act's requirement that consumers receive notice of adverse actions taken on the basis of credit reports. The court of appeals held that the companies could be found to have acted willfully if they recklessly disregarded the requirements of the law, and sent the case back to a lower court to determine whether the violations were in fact willful. Two of the companies, Safeco and Geico, sought Supreme Court review of the Ninth Circuit's definition of "willfulness" as well as an assortment of other issues. Public Citizen assisted attorneys for the plaintiff in attempting to persuade the Supreme Court to uphold the Ninth Circuit's decision.
The Supreme Court's June 4, 2007 decision upheld the Ninth Circuit's legal ruling that companies who show "reckless disregard" for FCRA's requirements may be held accountable for "willful" violations. The Court also rejected Safeco's principal defense of its failure to give notice, which had been that the consumers hadn't been treated adversely because they were first-time customers and therefore hadn't had their premiums "increased." However, the Court still held that Safeco's failure to give notice was not willful, because it was not clear enough that the company's legal theory was wrong. And the Court found that Geico had not even violated the law, because it had not charged the consumer more than it would have charged him if it had not checked his credit at all (even though it did deny him a preferred rate because his credit was not good enough to qualify).
The Court's decision is a mixed result for consumers. The court's acceptance of "reckless disregard" of the law (rather than a knowing violation) as the standard for showing willfulness will make it possible for more plaintiffs to obtain statutory penalties against companies that violate the law. And the Court's rejection of Safeco's argument that first-time customers are never protected by FCRA's adverse-action notice requirement avoids creation of a major loophole in the law. But the Court's holding that Geico did not violate the law creates a loophole at least as gaping as the one Safeco's argument would have created, and will prevent thousands of consumers from receiving notice even when their credit scores are used to deny them favorable rates in the marketplace.
- Whether the 9th Circuit erred in holding that a defendant may "willfully violate Sec. 616 of the Fair Credit Reporting Act, 15 U.S.C. 1681n, by acting merely in "reckless disregard" of statutory obligations, rather than by acting with knowledge that its conduct violates FCRA.
- Whether the 9th Circuit erred in creating new and open-ended disclosure requirements for adverse action notices beyond the discrete list expressly set forth in Sec. 615 of FCRA.
Other merits and amicus briefs in this case