Fair Credit Reporting Act Suits Have Soared Over Last Decade

Law360 (October 22, 2019, 11:21 PM EDT) — Lawsuits alleging violations of the federal Fair Credit Reporting Act have more than doubled in the last decade as privacy and accuracy concerns grow over the credit reports and background checks companies increasingly rely on, a new report shows.
The study, compiled by Lex Machina, shows that the numberof federal suits containing claims under the FCRA — the 1970 statute that regulates the collection and sharing of consumers’ credit reports — has climbed from 2009 to 2018.

FCRA cases hit the 3,000 mark in 2016 and stayed far above that every year since, the report says. The volume of FCRA cases topped out at 3,665 in 2017, about two-and-a-half times the 1,403 such cases filed in 2009, according to Lex Machina’s numbers. Plaintiffs filed 3,582FCRA cases in 2018, the report says, further evidence that the spike is no fluke.

Consumers bringing such cases have won multimillion-dollar verdicts and settlements in cases involving industry giants like credit bureaus TransUnion and Equifax.

Abbas Kazerounian of Kazerouni Law Group, which brought 279 federal FCRA claims between 2016 and 2018, cited two factors that have caused consumers to increasingly challenge allegedly inaccurate credit reports under the FCRA: the aftermath of the 2008 financial crisis and the rise of identity theft aided by cybercrime.

Many consumers who declared bankruptcy during the financial crisis emerged from that process with inaccurate credit reports they could only challenge with an FCRA suit, Kazerounian said. The rise of cybercrime has also made it more likely for criminals to amass debt in consumers’ names after stealing their identities, he added.

“The more ID theft that there is will have a direct correlation to more lawsuits,” Kazerounian said. “The problem is that if the credit bureau doesn’t recognize that the debt is not yours, the only recourse that you as a consumer have is to file a lawsuit under the FCRA.”

Many of the recently filed FCRA cases have also focused on background checks that employers allegedly misused during recruitment efforts. Madison Square Garden, for example, reached a $1.3 million deal in June to end claims it used criminal conviction background checks from credit agencies to deny jobs to minority applicants with criminal histories without investigating the reports or giving prospective employees a chance to dispute them.

Matthew Simpson, a partner at Fisher Phillips, said a heightened expectation of privacy in recent years over background report data as well as factors that have long made FCRA claims attractive to the plaintiffs bar, including that the statute calls for defendants to cover lawsuit costs and attorney fees, have also contributed to the increase in FCRA lawsuits. 

“It’s the perfect storm in that you have applicants and employees who are more sensitive to the disclosure of their personal data, including their criminal histories, as well as legal incentives for attorneys to bring these sorts of lawsuits,” Simpson said.

Tony Alexis, a partner in the financial industry practice at Goodwin Procter LLP and former head of the Consumer Financial Protection Bureau‘s Office of Enforcement, cited consumers’ “greater awareness” of the FCRA in recent years, based on regulators’ activity after the financial crisis and on attention given to the credit reporting ecosystem after Equifax’s massive data breach.

Lex Machina’s report looked at more than 132,000 consumer protection lawsuits filed in all federal district courts between 2009 and 2018. The report contains litigation information for cases filed under the FCRA, Fair Debt Collection Practices Act (FDCPA), Truth in Lending Act (TILA), Telephone Consumer Protection Act (TCPA), and under the Federal Trade Commission and CFPB’s authority to police unfair and deceptive trade practices, or UDTPs.

The report is limited to district court proceedings and does not account for circuit court proceedings, including appeals and some rule challenges.

While there were jumps in activity in some litigation areas, like the FCRA and the TCPA — cases ballooned from 412 in 2009 to more than 3,000 each year from 2014 to 2018 — filings in other areas dropped precipitously. Truth in Lending Act cases plummeted in the years since 2009, which the Lex Machina report suggests was fallout from the mortgage crisis at its height in 2009. 

TILA offers lower statutory damages than the FCRA and has a shorter statute of limitations, according to the report.

The defense firm that handled the most consumer protection lawsuits between 2016 and 2018 was Jones Day, an international firm that represented credit reporting giant Experian Information Solutions Inc. in about 4,000 cases from 2010 to 2018, according to the report.

Jones Day appeared in 84 of the 94 U.S. federal districts and saw nearly three times as many consumer cases in the three-year period from 2016 to 2018 than it did from 2010 to 2012, the report says.

New Orleans-based Sessions Fishman Nathan & Israel LLC saw the second-largest number of consumer protection cases between 2016 and 2018, representing debt collectors in 1,686 FDCPA cases alone. The firm has represented debt collection company NCO Financial Systems Inc. in more than 850 cases from 2010 to 2018, the report says.

Hinshaw & Culbertson LLP, Schuckit & Associates PC and King & Spalding LLP rounded out the top five, each handling more than 1,000 cases between 2016 and 2018, according to the report.

The most active plaintiffs firm in consumer protection cases between 2016 and 2018 was Atlas Consumer Law, which filed more than 1,000 TCPA cases alone, according to Lex Machina’s data. The second most active plaintiffs firm, Lemberg Law, appeared in 68 federal districts, more than any other plaintiffs firm, during that time, mostly handling cases filed under the FDCPA. The third most active firm, Sanders Barshay Grossman, included an FDCPA claim in nearly all of its 1,165 cases filed during that period.

Morgan & Morgan and Haines & Krieger rounded out the top five, filing 1,134 and 910 consumer protection cases, respectively, between 2016 and 2018, according to the report.

The Federal Trade Commission was the most active individual plaintiff in the consumer protection arena, filing more than three-and-a-half times the number of consumer protection lawsuits in federal district court as its fellow watchdog agency, the Consumer Financial Protection Bureau, between 2016 and 2018, the report says.

Lex Machina’s data shows that the FTC was named as a plaintiff in 124 federal district court lawsuits alleging violation of one of the consumer protection statutes, versus the CFPB’s 35. The CFPB had a particularly sharp drop in its output in 2018 under the leadership of Mick Mulvaney, an avowed opponent of the financial agency whom President Donald Trump appointed to serve as its acting director.

Under Mulvaney, the CFPB filed only two new federal district court actions in 2018, down from the 19 filed under former Director Richard Cordray in 2017. The agency also announced consent orders in 10 administrative proceedings on Mulvaney’s watch, down from 26 the year before he arrived, according to agency disclosures.

The two most active TCPA robocall litigation plaintiffs were Tennessee resident Craig Cunningham, who included 75 TCPA claims in 77 lawsuits filed between 2016 and 2018, and California plumbing company Abante Rooter and Plumbing Inc., which filed 48 different TCPA claims during that stretch.

Cunningham was likely able to secure a settlement in 46 of his lawsuits, according to the Lex Machina report.

It’s no surprise, given the rise of FCRA lawsuits, that the three most active defendants in consumer protection cases in recent years were the three main credit bureaus: Equifax, Experian and TransUnion LLC.

Equifax Inc. and its subsidiary Equifax Information Services LLC together handled a total of 5,002 cases between 2016 and 2018, while Experian saw 3,115 cases and TransUnion saw 2,994, according to the report.

Every case against Equifax Information Services contained an FCRA claim, and more than 600 cases had FDCPA claims, according to Lex Machina.

Other companies that handled massive litigation loads, landing them in the top 10 most-sued consumer protection defendants, included debt-related service companies such as Portfolio Recovery Associates LLC, Midland Credit Management Inc. and Midland Funding LLC, which each faced more than 800 FDCPA claims between 2016 and 2018, according to the report.

Law360 is owned by LexisNexis Legal & Professional, a RELX Group company, which owns Lex Machina.

–Additional reporting by Kevin Stawicki and Jon Hill. Editing by Jill Coffey and Alanna Weissman.

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