11 Jun COVID-19 and the Fair Credit Reporting Act
In response to the COVID-19 pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), in March 2020, which amended the Fair Credit Reporting Act (FCRA) and created new reporting requirements for financial services institutions. Additionally, the Consumer Financial Protection Bureau relaxed enforcement of the FCRA depending on the individual circumstances that furnishers faced from the impact of the pandemic.
Although the CARES Act amended the FCRA, it did not substantively change the liability of furnishers, nor did it change the defenses furnishers have available to reduce FCRA risk. Under the FCRA, a consumer can only bring a claim asserting that a furnisher did not comply with their duties to investigate and respond to consumer disputes. In addition to having a very limited right of action, consumers also must satisfy the elements of the action, which has proven to be a difficult task. A consumer must show that the furnisher violated the FCRA either knowingly or with a reckless disregard of statutory duty. This violation is not considered knowing or reckless when the furnisher relied on an interpretation of the law that while wrong, was not objectively unreasonable – this is the reasonable interpretation safe harbor defense. A consumer must also prove Article III standing – a strong defense for furnishers – which requires that the consumer suffered an injury that is concrete, particularized, and traceable to the furnisher’s conduct.
Even before the CARES Act, these claims were regularly dismissed early on as consumers failed to allege each of the elements. The CARES Act did not change any of the elements required for consumers to plead. Furnishers have a solid federal preemption defense in most cases as well. The FCRA preempts most state law claims, including claims under state consumer protection statutes, and most claims that relate to the duties, responsibilities, and obligations of furnishers.
While COVID-19 and the CARES Act did not substantively change the responsibility of furnishers under the FCRA, it changed their ordinary practice and has resulted in an influx of FCRA-related litigation that is likely to continue.
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