Consumer Wins Substantial Credit Reporting Act Damages

Reprinted from the CCH Federal Banking Law Reporter.

A consumer will be permitted to recover more than $250,000 for a consumer reporting agency's negligent violations of the Fair Credit Reporting Act (FCRA) under a decision of the U.S. Court of Appeals for the Fourth Circuit. Although the court did reduce the jury's original $351,000 award, it affirmed all of the economic damages that had been awarded and allowed $150,000 of the award for mental and emotional damages to stand.

The consumer's problems began when she was the victim of identity theft. According to the court, several years after the thief was arrested, convicted and imprisoned, the reporting agency had failed to correct completely the resulting problems in the consumer's file. Some erroneous entries remained and others reappeared after having been removed. The agency admitted that its efforts had not complied with its own internal policies, the court noted.

Multiple Injuries

The court began by rejecting the agency's theory that the consumer had suffered only a single, indivisible injury from the errors. Had this position been accepted, the damage award would have been reduced by the amounts the consumer had received in settlements with other defendants in order to avoid allowing her multiple recoveries for the same injury.

The consumer had not claimed that the consumer reporting agency was responsible for the original identity theft, the court noted. Her attempts to rectify the errors in her records at the various reporting agencies did not all take place at the same time, the court said. Also, the agency that had not settled the consumer's suit produced reports with different errors and made changes independently of those that had settled. As a result, the consumer had suffered more than a single injury, the court decided.

Damages

The jury's award of $106,000 in economic damages was affirmed. The consumer was denied credit or offered credit only on disadvantageous terms after lenders relied at least in part on the reporting agency's erroneous credit report, and that provided an adequate basis for the jury's decision.

However, the jury's award of $245,000 in damages for the consumer's mental anguish, humiliation and emotional distress was determined by the court to have been excessive. The consumer had produced objective evidence of significant injury from the violation and had corroborated that evidence, the court observed. Moreover, the reporting agency's violations reasonably could have caused the injury the consumer complained of. But, emotional distress damages under the FCRA typically were significantly less than what the jury awarded the consumer, the court said, noting also that the errors did not rise to the level of defamation, which might have justified a larger award. Thus, the court reduced the damages to $150,000.

Sloane v. Equifax Information Services (4thCir)