This week, a federal court rejected an attempt in litigation under the Fair Credit Reporting Act (“FCRA”) to assert claims against not only Credit Reporting Agencies (“CRAs”) but also the Chief Executive Officers (“CEOs”) of the CRAs (“CEO Defendants”),  concerning claims that they failed to respond to communications or remove an errant account from Plaintiff’s credit report.  Estrada, 2022 U.S. Dist. LEXIS 123000 (D. Az. July 12, 2022).  While this case is consistent with the rulings of other courts that have addressed this issue, it is still significant as allowing Plaintiff’s claims to proceed would have resulted in a radical expansion of the FCRA’s scope and private right of action.  Read on to learn more.

First, some statutory background.  The FCRA provides that:

It is the purpose of this subchapter to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner that is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this subchapter.

15 U.S.C. § 1681(b) (emphasis in original decision).  The FCRA includes a private right of action for individuals aggrieved by a violation, as well as statutory liquidated damages, making it a frequent target by plaintiffs in data privacy litigations.

The FCRA defines the term “consumer reporting agency” as: [A]ny person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports. 15 U.S.C. § 1681a(f). However, “person” as used in the FCRA is defined as “any partnership, corporation, trust, estate, cooperative, association, government, or governmental subdivision or agency, or other entity.” 15 U.S.C. § 1681a(b).

In this litigation, the section of the FCRA under which Plaintiff sought to impose liability on the CEO Defendants provided that “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” 15 U.S.C. § 1681e(b).

It is well-established that, in litigations involving the FCRA and in other cases more broadly, “individual defendants cannot be held liable solely because they are chief executive officers for the corporate defendants.”  (quotation omitted).  Instead, a high showing is necessary to impose personal liability on corporate officers in only those rare instances where the corporate officer “was the guiding spirit behind the wrongful conduct … or the central figure in the challenged corporate activity.”

The Court ruled that this heightened standard was plainly not satisfied in this case.  First, the Court held that “the CEO Defendants are not CRAs for the purposes of the FCRA but are merely officers of the CRAs themselves.”  And second, the Court found that Plaintiff did “not allege that the CEOs took actions individually which led to the CRA violations” and merely conflate[d] the CEOs with the CRAs themselves.”  This was inadequate, particularly in the absence of any other allegations concerning the CEO Defendants, for the Court to find that Plaintiff sufficiently pled his FCRA claims.

For more, stay tuned.  CPW will be there to keep you in the loop.