Enforcing the Fair Credit Reporting Act Through Private Actors

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Scholar argues that more private enforcement mechanisms will strengthen consumer credit reporting.

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Suppose you open your credit report to discover that your mortgage lender has been reporting inaccurate information. You contact your lender, but the information remains uncorrected and your credit plummets. Out of options, you sue the lender. But your lawsuit is dismissed because the Fair Credit Reporting Act (FCRA) does not provide borrowers any legal remedy for these violations.

That lack of remedy is a fundamental flaw of the FCRA, according to Alexandra P. Everhart Sickler, a professor at the University of North Dakota School of Law. In a recent paper, Sickler claims that the enforcement mechanisms of the FCRA fail to promote accurate credit reporting. Under the Act, furnishers—parties that provide information to credit reporting agencies like Equifax—must ensure that the information is accurate. Consumers, however, are barred from enforcing this provision. Sickler proposes that Congress create and structure a private right of action to increase accurate reporting by furnishers.

Under the Act, consumers can pursue legal action against a company that furnishes inaccurate information in only one instance: if, after a consumer files a dispute with a credit reporting agency, the furnisher fails to reinvestigate the information’s accuracy. Instead, only the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau, and other public regulators can enforce the FCRA provision that prohibits furnishers from disclosing inaccurate information to credit reporting agencies.

But according to Sickler, public regulators are not filling this “regulatory void.” As evidence, Sickler observes that during a 40-year period of enforcing the FCRA, the FTC brought only 87 actions against not just furnishers, but credit reporting agencies and users of credit reports overall.

Sickler contends that this lack of private and public enforcement negatively affects consumers. Inaccurate credit reports can impact many aspects of a consumer’s livelihood, including increasing the amount a consumer pays for insurance and determining whether a consumer can rent a home.

Private enforcement would help reduce inaccurate reports, Sickler maintains. Furthermore, interpreting the FCRA to contain a private right of action would remedy harm after it occurs. Sickler argues that such a right would also conform to the law’s initial purpose—ensuring that credit reports are accurate.

Sickler asserts that private lawsuits should act as a secondary mechanism that supplement enforcement by regulators, rather than a primary mechanism. Because public regulators have better access to information about potential FCRA violations, Sickler states that these regulators should have primary responsibility to enforce the law. Sickler further observes that public regulators can “identify and correct deficiencies at a systemic level” by informally communicating with furnishers and promulgating regulations—an additional factor that weighs in favor of their primary enforcement authority.

Other scholars disagree with Sickler’s contentions, claiming that government enforcement of the FCRA is more than adequate. In a recent article, David Anthony and Julie Hoffmeister—attorneys at the law firm Troutman Sanders—claim that because of an increased regulatory focus, furnishers are now subject to “harsh consequences.”

In addition, other scholars contend that even though private enforcement can be advantageous, it can be problematic as well. Aside from increased costs and litigation, “private litigation may actually discourage compliance efforts,” according to research cited in a paper by legal scholars Stephen Burbank, Sean Farhang, and Herbert Kritzer. They observe that private enforcement may lead to judges making policy, which can produce inconsistent doctrine and decrease cooperation with public regulators.

Sickler notes that courts have disagreed over issues such as the scope of remedies under FCRA, and have produced different interpretations of certain provisions in the statute.

But despite these inconsistent interpretations, Sickler maintains that private litigants should have the ability to sue furnishers who repeatedly provide credit reporting agencies with inaccurate information. She argues that current inconsistent judicial interpretations of certain FCRA provisions are primarily a result of gaps in the statute’s structure.

Sickler further contends that if Congress were to structure the private right of action to supplement public enforcement, such a change could encourage furnishers to abide by the FCRA. As a primary regulator, agencies could work with regulated entities, such as by sharing information on best practices and procedures.

Sickler’s article appeared in the Loyola Consumer Law Review.