Congress Should Reject Rep. Loudermilk’s Bill to Gut Basic Privacy Rights
By Paul Bland
Credit reporting agencies make a lot of mistakes. More consumers complain to the Consumer Financial Protection Bureau about the Big Three credit reporting companies (Equifax, Experian and TransUnion) than almost all other financial companies in the U.S. (mostly about false information about consumer debts and financial information). And the problems are often particularly pronounced with agencies that do background checks on consumers for employers, or landlords, and that, in turn, decide whether many Americans can get a job or a place to live.
Sometimes these credit reporting companies have terrible systems, and falsely label hundreds or even thousands of consumers as criminals (or in one recent case, as terrorists or drug dealers). Currently, under the Fair Credit Reporting Act (FCRA), if an agency that gathers information about people has willfully put in place insufficient procedures for assuring accuracy, they have to pay either the damages that the consumer actually suffered or a set amount (up to $1,000) to any consumer about whom they have provided incorrect information. For the latter “statutory damages,” the consumer doesn’t have to prove that they lost money or suffered a physical injury because of the false statement; Congress rightly concluded that it would be better for consumers to get a fair sum as rough justice for the injury. In doing so, Congress was also trying to discourage corporations from willfully making these kinds of mistakes.
One upshot of this rule is that sometimes, when a group of consumers can prove that a corporation had a terrible system that led to widespread errors, and willfully continued to make those errors after the problem was evident, they can join together and bring a class action lawsuit. There have been some cases where this was a very important means of winning recoveries for injured consumers and changing abusive corporate practices.
But now, the FCRA is under attack. H.R. 2359, introduced by Rep. Loudermilk and euphemistically titled the “FCRA Liability Harmonization Act,” is a blatant effort to gut the existing protections that consumers have against false statements by credit reporting agencies. Among other things, H.R. 2359 would put an artificial cap of $500,000 on the amount consumers could recover in a class action, whether it be the damages they actually suffered or statutory damages. So, without knowing how many consumers have been injured by a credit reporting agency’s mistakes, and without knowing anything about the nature of the injury the consumers suffered or the strength of the evidence that the company acted willfully, H.R. 2359 nonetheless sharply limits what can be recovered.
H.R. 2359 also bars consumers from receiving punitive damages, even in cases where there are extreme facts showing that the credit reporting agency had extensive actual knowledge that its statements about a consumer were dramatically false (there have been cases where the agencies have gotten numerous notices and ignored them, among other situations), and even where the consumer’s life was dramatically damaged. The bill undermines the laws protecting consumers’ privacy on two dramatic levels, in ways that are extremely harmful.
Here’s an example of a successful class action that H.R. 2359 would have gutted and made impossible, harming thousands of consumers and letting a corporation lie about consumers’ supposed criminal records: Intellicorp Records, Inc. is a consumer reporting agency that sold an “instant” employment background report called the “Criminal SuperSearch,” over the internet. Companies considering whether to hire a new employee would pay Intellicorp, and get a report saying whether the prospective hire had a criminal record or not. But the problem was, the Criminal SuperSearch results were riddled with inaccuracies. Thousands of people were falsely labelled sex offenders or drug criminals when they were not. Under the FCRA, Intellicorp should have told job applicants about the reports sent to the employer and the employer should have told the applicants they were not being hired based on the reports, but these legal requirements were widely ignored by Intellicorp and employers.
Given Intellicorp and the vast majority of employers ignoring the notice requirements to consumers, consumers generally had no way of knowing that Intellicorp was saying such false things about them. All most consumers ever learned was that she or he applied for a job and was turned down. Employers were telling people “hey, we paid this company $30 and they say you’re a criminal.” They would just say “we aren’t hiring you.”
But a couple of consumers did get wind of the problem, through luck and circumstance. And a class action was filed, Roe v. Intellicorp. After fierce litigation in which a lot of damning documents came to light, the case was settled for more than $18 million, with checks going to thousands of consumers who’d been falsely labeled criminals. In addition, Intellicorp also made a variety of changes to make its product far more accurate. The settlement was approved by a federal judge in Cleveland. This is a perfect example of how a class action can help consumers: a whole bunch of injured people got a substantial recovery, and a corporate bad actor cleaned up its act.
But Rep. Loudermilk, strongly supported by the credit reporting industry, would make a case like Roe v. Intellicorp impossible. Instead of recovering $18 million for thousands of cheated consumers, H.R. 2359 would have limited the class’s recovery to $500,000. With that kind of limited liability, it’s likely that it would have been impossible for the consumers to bring a case (where they would have to prove that the defendant knew what the law is and broke it anyway, and where they would need complicated expert testimony to set out why Intellicorp’s system was poor, and in order to go through its complex computer system to identify the injured consumers).
In what world does it make sense to say that consumers would be better off letting a corporation like Intellicorp say false things about them, and make it impossible for people to get jobs because the agency was telling employers that they were criminals when they were not? The answer is simple: it makes no sense for those who were wronged. It only makes sense for the credit reporting agency, which would rather not have consumers hold it accountable when it breaks the law.
In the end, the only “harmonization” this wrong-headed bill would bring about is between lobbyists for the credit reporting industry and the lawmakers, like Rep. Loudermilk, who pocketed their campaign contributions while ignoring the impact their proposals will have on workers and consumers. Indeed, it would virtually wipe away the “Fair” part of the “Fair Credit Reporting Act,” and Congress should never let it see the light of day.