Earlier this year, the U.S. District Court for the Eastern District of Pennsylvania clarified what constitutes a consumer reporting agency (CRA) under the Fair Credit Reporting Act (FCRA). It did this by finding that an alleged public records vendor could be a CRA under the definition of the FCRA.

In this case, the plaintiffs had applied to refinance a mortgage on their home. In connection with the request, the bank requested the defendant to run a public records search of the plaintiffs. According to a deposition from the defendant, they created “Judgment Reports” through subcontractors who traveled to repositories of records for the investigations. For this case, the contractor visited a courthouse and searched for documents matching the plaintiffs’ names and address.

The following results reached the defendant, compiled into a Judgement Report, and included in a more extensive report provided to the bank. According to the plaintiffs, this report included inaccurate information about them. As a result, the bank delayed approving their mortgage refinancing because of these alleged inaccuracies. This delay caused the plaintiffs to file a lawsuit claiming violations of the FCRA’s Sections 1681(b) and 1681I.

The defendant moved for summary judgment, which the court denied and granted in part. First, the court considered the defendant’s argument that it is not a CRA under the FCRA’s definition. The argument asserted that the company does not produce consumer reports, claiming only to report public information.

The court disagreed with this conclusion, stating that preparing a consumer report is a requisite for being a CRA. Upon reading the statutory information, the court found that, though only a CRA can produce a consumer report, an organization does not need to offer a consumer report to be a CRA. It only needs to act “for the purpose of furnishing consumer reports.”

Based on the language of the FCRA, the court determined that the defendant is a CRA on four factors:

1. The company received payment for its services.
2. It used a facility for interstate commerce, more specifically, email.
3. The activities performed constituted assembling.
4. Public record information used to determine eligibility qualified as “consumer credit information.”

Secondly, the defendant argued that, even if it were determined to be subject to the FCRA, its procedures were reasonable. The defendant continues, saying CRAs are not required to investigate beyond the face of court documents to verify accuracy. The court also rejected this argument, finding there was a triable issue of whether its procedures were “reasonable” under Section 1681e(b) of the FCRA. However, the court granted the defendant summary judgment regarding the plaintiffs’ willfulness claim, finding that the defendant’s reading of the FCRA was not objectively unreasonable.

Avoid situations like this by staying updated with fair chance hiring compliance. Read our free guide Adverse Action Notice Protocols in Compliance With FCRA to learn more.

Source