CFPB Recommends Limits on FCRA Lawsuit Awards

Written by ESR News Blog Editor Thomas Ahearn

On January 5, 2021, the Consumer Financial Protection Bureau (CFPB) published a two-volume “Task Force on the Report on the Federal Act on Consumer Financial Law” (Volumes I and II), in which recommendations for improving consumer protection in the financial market, including recommendations, were made Congress amends the Fair Credit Reporting Act (FCRA) to appropriately limit the cash rewards in FCRA class action lawsuits.

It states: “Without adequate upper limits, claims for damages can lead to legal disputes between companies that are disproportionate to consumer damage. The FCRA sets statutory damages for willful breach of any provision of the law of at least $ 100 or more than $ 1,000, in addition to unlimited punitive damages plus legal and legal fees. The task force is unclear why Congress left off a class action damage cap in the FCRA. “

The FCRA was passed by Congress in 1970 to promote the accuracy, fairness, and confidentiality of consumer information on consumer reporting agencies (CRAs) files and to protect consumers from willful and / or negligent inclusion of inaccurate information in their consumer reports. and regulate the collection, dissemination and use of consumer information, including consumer credit information.

The CFPB report continued, “Since the FCRA was among the first consumer finance laws passed by Congress, no clear precedent had yet been set for limiting class action damages … Whatever the reason for the original lack of a class bonus cap was, the task force I see no reason to expose credit rating agencies, consumer report users, employers, dealers and other businesses to unlimited potential liability. “

Complaints about suspected violations of the FCRA have become all too common in background screening and can lead to cash prizes of thousands and even millions of dollars. In 2020 alone, FCRA litigation closed for $ 4.75 million, $ 4.25 million, $ 1.28 million, $ 500,000, $ 220,000, and $ 120,000. In addition, a $ 18 million settlement was proposed and an appeals court cut “excessive” damages of $ 60 million.

The CFPB report also recommended clarifying the obligations of rating agencies and depositors in the event of disputes under the FCRA, codifying the FCRA’s interpretations in the 40-year report of the Federal Trade Commission (FTC), the accuracy and completeness of consumer credit reports assess and update the summary of consumer rights by the FCRA, the notification to the providers of information to the credit rating agencies and the notification to the users of consumer reports.

FCRA lawsuits will continue to serve as a guide to compliance for employers who conduct background checks on applicants, according to the world’s leading background screening provider, Employment Screening Resources® (ESR), which hosts the 14th annual “ESR Top Ten Background Check Trends” for 2021. Since 2008, ESR has annually selected the top emerging and influential trends in the background screening industry.

“Congress and regulators should also consider providing an official FCRA disclosure form rather than letting employers guess what is compliant,” said Attorney Lester Rosen. “Many class action lawsuits have relied on arguments about the exact pronunciation in the disclosure form, although there is little evidence that consumers will actually be harmed if the form is not perfect.”

Rosen, the founder and chief executive officer (CEO) of ESR, said the CFPB is already offering a “Summary of Your Rights Under the Fair Credit Reporting Act” to inform consumers of their rights if they undergo a background check. “It only makes sense that unnecessary litigation can be avoided by having the government set the precise disclosure form, rather than clogging the courts with class-action lawsuits based on technical grounds,” added Rosen.

Employment Screening Resources® (ESR) – named the number 1 screening company by HRO Today – offers two free white papers on the topics “Common Ways Consumer Reporting Agencies Are Sued Under FCRA” and “Common Ways Prospective or Current Employees Sue Employers Under the FCRA ”to help rating agencies and employers comply with the FCRA. Further information on ISR can be found at

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