United States Supreme Court Enforces
Statute Limitations to Sue Over Credit Reports

US Supreme Court resolves conflict

The United States Supreme Court has resolved a conflict among the circuit courts to consider how long a consumer has to bring a claim under the Fair Credit Reporting Act. The FCRA provides that a consumer has two years in which the claim arises to bring an action under FCRA. With the case TRW, Inc. v. Andrews, 00-1045, the U.S. Supreme Court has decided when the cause of action arises for the purposes of determining the two year limitation.

The FCRA

The FCRA regulates the use of individual credit reports and credit information. Generally the collection of business, trade, and commercial credit reports are not covered by FCRA. The FCRA insures that credit reporting agencies, and the users of such reports, will respect a consumer's right to privacy by pulling consumer credit reports only after express written authorization from the consumer.

Pulling Individual Credit Reports

The Federal Trade Commission is a federal regulatory agency that enforces the provisions of the FCRA. The FTC has vacillated on whether a vendor extending commercial credit must obtain the consumer's consent prior to pulling a consumer credit report to be used for business purposes, or for a personal guarantee of business credit. To be safe, a vendor should obtain the consumer's consent prior to pulling a consumer credit report when extending credit for business purpose.

Penalties For Violating FCRA

The private enforcement provisions of the FCRA permit a consumer to bring civil suit for willful noncompliance with the FCRA, with no ceiling on punitive damages. The consumer may sue for negligent noncompliance, for actual damages sustained. The consumer may also seek to recover the consumer's attorneys' fees. In addition, criminal penalties may also be assessed including fines and imprisonment against any person who knowingly and willfully obtains a consumer report under false pretenses.

The Statute Of Limitations Under FCRA

The FCRA provides that a consumer has two years from the date the claim arises in which to bring an action under FCRA. But when does that time begin to run? When a vendor pulled the credit report without the consumer's authorization, or when a consumer learns that the report was pulled? The difference between the two may be considerable.

U.S. Supreme Court's Decision

The U.S. Supreme Court has decided whether the statute of limitations begins to run when the wrongful credit disclosure is made or when the individual knows or has reason to know of the act. In Andrews, the problem began when a business copied personal information about an individual, and fraudulently used the information about the individual. When the individual discovered the fraud, she requested the credit reporting agency to delete the fraudulent transactions from her report. The reporting agency complied, but the individual sued the agency claiming they did not do enough to insure that the information it sold was accurate. The lower court ruled that the claim against the reporting agency was timely pursued. The U.S. Circuit Court for the 9th Circuit disagreed and reversed the District Court holding that the individual could pursue claims against the reporting agency. The credit agency appealed to the U.S. Supreme Court.

The U.S. Supreme Court ruled 9-0 that the clock started to pursue claims against the credit reporting agency when the credit agency passed on the erroneous information, not when the individual discovered the fraud. The Supreme Court stated the deadline is clear under the FCRA and that changes would have to come from Congress. The Supreme Court's ruling places the burden of reviewing and insuring the accuracy of the credit report on the individual who is better able to determine the existence of an erroneous entry and limits the potential liability on the credit reporting agencies and creditors reporting to those agencies.

Reprinted by permission from Trade Vendor Quarterly Blakeley & Blakeley LLP Fall 01