Can the United States Government be liable for reporting inaccurate credit information on a consumer and then failing to investigate the consumer's dispute? Many courts are divided as to whether the Fair Credit Reporting Act ("FCRA") applies to the United States Government. In Jones v. United States Department of Agriculture, the District Court for the Eastern District of Michigan recently waded into the dispute, concluding that the Government could be on the hook for such actions and failures.
In Jones, consumer plaintiff Kyisha Jones initially owed the United States Department of Agriculture for unpaid medical insurance bills. Eventually, however, she paid the entire outstanding balance. Despite paying the balance, Jones alleged that the Government continued to inaccurately report information regarding the debt to the three major credit reporting agencies. Jones claims that when she disputed the reporting, the USDA failed to conduct a reasonable investigation into its reporting. Jones subsequently sued the USDA for violating the FCRA.
The USDA moved to dismiss Jones' complaint, arguing that the FCRA does not waive sovereign immunity for claims against United States Government entities. The court disagreed. According to the Court, when the United States waives sovereign immunity by statute, the waiver must be unequivocal. With this standard in mind, the Court focused on the FCRA's liability scheme. In the Court's view, the FCRA allows a consumer to hold any "person" liable, which the statute defines to include "any ... government or government subdivision or agency." This was sufficient for the Court to find a waiver of sovereign immunity.
The Court's conclusion is consistent with the Seventh Circuit's 2014 Bormes decision. There are other district court opinions, however, that go the other way. In its decision, the Jones court recognized that other courts have declined to find a waiver of sovereign immunity in the FCRA because to do so would expose the United States to punitive damages or subject government employees to criminal penalties. The court reasoned, though, that those considerations do not change the FCRA's express waiver language.
With the developing split of authority nationwide, perhaps the Supreme Court will eventually be forced to decide whether it too can be held liable for alleged FCRA violations. Until that time, we will continue to track the crossroads of the FCRA and governmental sovereign immunity.
The Troutman Sanders' Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here
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