The 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 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.
Helping to defend the court of appeals’ decision, Public Citizen served as co-counsel for the consumers at the Supreme Court stage of the case. The Supreme Court 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 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 violated the law because it had not charged the consumer more than it would have charged him if it had not checked his credit.
The Court’s decision was 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 makes 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 avoided creation of a major loophole in the law. On the other hand, the Court’s holding that Geico did not violate the law creates a loophole that prevents thousands of consumers from receiving notice when their credit scores are used to deny them favorable rates in the marketplace.