This week, the Sixth Circuit addressed the Fair Credit Reporting Act in two different opinions. In the first, the Court found that Experian violated the FCRA when it failed to investigate or clarify a consumer report about outstanding child support obligations after the consumer provided it with evidence from the court that he owed no outstanding child support obligations. Berry v. Experian Information Solutions, Inc., No. 23-1961 (6th Cir. Aug 19, 2024). In the second, the Court found that the job applicant could not sue an employer for failing to provide him with a copy of his complete consumer report after it provided him with a copy of the partial (and accurate) report when he could not identify how he would have acted differently or been able to cure his prior failure to self-disclose a conviction. Merck v. Walmart, Inc., No. 23-3698 (6th Cir. Aug. 20, 2024).
In Berry, the plaintiff paid his wife directly
instead of through the state agency, which recorded a deficiency. When they reconciled, he obtained a court
order that abated the non-existent support debt. However, he was denied student loans because Experian
reported information from the still-inaccurate state government database. He sent copies of the court orders to Experian,
which continued to rely on the state database and did not update its report. He sued alleging that Experian negligently or
willfully continued to report inaccurate information in violation of the FCRA. The district court granted Experian judgment
on the pleadings because it was required to report the state agency’s
findings. However, the Sixth Circuit
reversed “[b]ecause [the plaintiff] sufficiently pleaded that Experian did not
adopt reasonable procedures to ensure maximum possible accuracy and did not
reasonably reinvestigate [his] consumer report after he challenged its accuracy.” Consumer Reporting Agencies
must “adopt reasonable procedures”
for reporting, see id. at § 1681(b), that “assure maximum possible accuracy of
the information concerning the individual about whom the report relates.” 15
U.S.C. § 1681e(b). If a consumer disputes a report’s accuracy, the CRA must
“conduct a reasonable reinvestigation to determine whether the disputed
information is inaccurate and record the current status of the disputed
information, or delete the item from the [consumer’s] file.” 15 U.S.C. §
1681i(a)(1)(A). If a CRA negligently or willfully violates the accuracy
mandate, the consumer may bring suit. Id. at § 1681n (allowing private right of
action for willful noncompliance); § 1681o (same for negligent noncompliance).
Relevant here, the FCRA states:
Notwithstanding any other
provision of this subchapter, a consumer reporting agency shall include in any
consumer report furnished by the agency in accordance with section 1681b of
this title, any information on the failure of the consumer to pay overdue
support which— (1) is provided—
(A) to the consumer reporting
agency by a State or local child support enforcement agency; or
(B) to the consumer reporting
agency and verified by any local, State, or Federal Government agency.
15 U.S.C. § 1681s-1.
The Court found that to prevail on a claim that the CRA
failed to have reasonable procedures to assure maximum possible accuracy, the
plaintiff must plead and prove that the information is inaccurate.
An inaccuracy in a consumer report
occurs when “a CRA report[s] either ‘patently incorrect’ information about [the
consumer] or information that was ‘misleading in such a way and to such an
extent that it [could have been] expected to have an adverse effect [on the
consumer].’” . . . In other words, a
consumer can demonstrate an inaccuracy where a report was materially misleading
or incomplete, even if it was technically accurate. Consequently, “accuracy”
under the FCRA encompasses truthfulness and completeness.
Because the FCRA is designed to
promote accuracy, “false impressions can be just as damaging as false
information.” . . . For example, in Twumasi, the plaintiff Uber driver
was fired after the CRA reported to Uber that the plaintiff had been involved
in three car accidents. .. . While the Ohio Bureau of Motor Vehicles (BMV)
furnished information to the CRA that did demonstrate that the plaintiff had
been involved in three accidents, the BMV did not include a police report and
court document adjudging him not at fault for two of the accidents. . . . Although the plaintiff submitted this
counter-evidence of his lack of fault to the CRA, the CRA did not change his
consumer report.
Similarly, in this case, “Experian’s [alleged] omission of
the court orders and its failure to inquire further resulted in a consumer
report that was “‘misleading in such a way . . . that it [could have been]
expected to have an adverse effect . . .’”
That being said, a dispute ensued about whether Experian was
required to remove the state report or merely supplement or clarify it with the
court order. The Court agreed that
Experian need not remove the allegedly erroneous state agency report. The dissent/concurrence indicated that the
plaintiff had waived the supplement theory argument, thus losing the appeal. However, the majority remanded the case back to
the district court to consider the supplement theory. In practice, this means that the plaintiff
may still not have been able to obtain student loans with ambiguous information
and he should focus his efforts on clearing his credit with the state agency.
In Merck, the plaintiff “applied to work at Walmart, [but]
he forgot to disclose an old misdemeanor conviction.” He was given a job offer conditioned on
passing a background check. “Before an
employer can take any adverse action against a prospective employee based on a
negative consumer report, the Fair Credit Reporting Act requires that the
employer provide him with a copy of the report.” The plaintiff was provided with “an incomplete
version of the report that listed his misdemeanor and indicated he was “not
competitive” for a job at Walmart” -- because of the failure to previously
disclose the conviction. He was provided with information to dispute
the accuracy of the report, but did not do so. Unlike the plaintiff, Walmart
was also informed that he had not self- disclosed the conviction. He alleged
that he would have at least questioned the matter if had known it was the
failure to self-disclose instead of the prior conviction that caused him to
lose the job. The
Court found that he lacked sufficient injury from the incomplete report to sue
Walmart when he did not identify how he would have changed the result and the
undisputed evidence showed that he could not change the result.
Walmart acknowledged that if [the
plaintiff] had initially disclosed the misdemeanor, he would have been scored a
“Competitive” applicant. But a Walmart employee also testified that, because
the background report contained accurate information about his conviction, his
only option under then-effective Walmart policy was to reapply—in other words,
he could not have changed the outcome by explaining the mistake. And although [the
plaintiff] argues that there is “uncertainty” about Walmart’s exercise of its
“final hiring authority,” see Reply Br. 22, he doesn’t point to any specific
evidence in the record suggesting Walmart would have acted contrary to its
policy had he been able to explain his mistake.
In fact, he applied several more times and did not even
receive an interview, let alone a job offer.
Walmart only kept applications for 60 days and no local store employees
knew about his failure to self-disclose, which had only been reported to
corporate HR. He also sued the CRA for disclosing
an old conviction that was more than seven years old and settled with it.
He then sued Walmart in a class action almost 4 years after
he had first applied on the basis that it violated the FCRA by failing to
provide him and all other job applicants a full copy of the consumer report
upon which it relied. The district court
dismissed on the grounds that the alleged informational injury was not
actionable because “(1) the report was not inaccurate, and (2) Walmart
testified that it would not have hired Merck even if he had been able to
explain that he had mistakenly omitted the misdemeanor from his paperwork.” In short, he failed to show that he suffered
an injury the statute or constitution are designed to remedy. “Under constitutional standing doctrine, an
“injury in fact” is an “invasion of a legally protected interest which is (a)
concrete and particularized and (b) “actual or imminent, not conjectural or
hypothetical.” The Constitution “requires
a concrete injury even in the context of a statutory violation.” In other
words, “plaintiffs do not have standing to assert “bare procedural
violation[s], divorced from any concrete harm.”
“[T]o have standing for an informational injury, a plaintiff
must allege those two elements: (1) adverse effects that (2) result from the
denial of information.” After discussing
a number of analogous cases, “this boils down to a fine line between an injury
involving merely the denial of information subject to mandatory disclosure by
statute—insufficient for standing—and a denial of information that causes
“downstream consequences”—sufficiently concrete to establish standing.”
. . . . The denied information must
specifically relate to some negative outcome that the plaintiff suffered
because he was unable to use that information to his benefit. So, to show
standing at summary judgment, [the plaintiff] must point to specific evidence
tending to prove that he has an interest in using the withheld information—the
fact that he wasn’t hired because he failed to disclose his conviction—for some
purpose beyond his statutory right to receive it. . . . In other words, his interest in using the
withheld information must extend beyond simply suing to vindicate that
interest.
In this case, the plaintiff did not and could not show that
being informed about the code given to Walmart -- but not to him -- about his
failure to self-disclose his prior conviction would have changed the result to
his benefit.
First, and perhaps most
importantly, Walmart argues that its policy meant that it would not have
reconsidered its initial decision not to hire him based on his failure to
disclose the misdemeanor. And Walmart’s argument is supported by the record. . . . More to the point, [he] fails to carry his
burden to identify any evidence in the record suggesting otherwise. On appeal,
he argues there’s “uncertainty” about whether his first application could have
“gone differently” had he known about the true basis for his rejection. . . . But that’s not enough. He needed to identify
specific evidence that he could have used the denied information to create some
material benefit (or avoid some adverse consequence) to himself—and, given the
record, he could not have used the information about the self-disclosure code
to change anything about the result of his first application. . . . So he fails to show he suffered any downstream
consequences from Walmart withholding the “R3” code during his first
application and rejection.
Similarly, [he] points to nothing
in the record indicating that he would have used the withheld information to do
anything differently during his second and third applications to work at
Walmart. Very helpful to [his] case would have been evidence that Walmart in
some way relied on [his] lack of an explanation to reject his later
applications outright before allowing him to fill out a new criminal history
addendum. Indeed, if there were some evidence to that effect, [he] likely would
have a forceful argument that the withheld information materially affected the
outcome of those applications. After all, in any later calls to Walmart, he
could have attempted to correct that misimpression.
But during discovery, [he]
apparently couldn’t uncover any evidence that Walmart rejected his later
applications because of his failure to disclose the misdemeanor. And the
evidence that we do have suggests that [his] first application had no bearing
on the later ones. A Walmart employee testified that Walmart retained
employment application information for only sixty days. Walmart also points to
a policy indicating that the self-disclosure code was “used by” human resources
“only and is not relevant to the hiring manager” at the store “or the
candidate.” . . . Walmart argues that store employees would not
have known what these codes meant. And [he] points to no record evidence
refuting that. So it seems that even if [he] had known about the true basis of
his first rejection, the record before us suggests he couldn’t have used that
information to improve his chances for his second and third applications at
Walmart. If his first application had no bearing on his later ones, we simply
can’t say why he didn’t get interviewed the second and third time around. [his]
burden was to show the reason related to the withheld information. He has not
met that burden.
Finally, [he] argues that he has a
general interest in understanding “why his job application had gone wrong at
Walmart” because he was searching for other employment at the time. . . . Abstractly, this interest is compelling. But
again, [he] fails to point to any evidence in the record that he could have
used the denied information to do anything differently. He might be in a
different position if he introduced proof that he declined to apply to other
positions because he worried that his misdemeanor might bar him from being
hired or spent more time unemployed than he otherwise would have if he had
known that the true issue was merely his failure to disclose. But he cannot
point to any supporting evidence in the record. Other than a passing reference
to feeling like a “failure” after his rejection from Walmart, he identifies nothing to suggest any material
harm that resulted from the denial of information. Indeed, he applied for one
other job after being rejected. He disclosed to the employer that he had a
misdemeanor conviction. He got the job. And he timed the start of his job so
that he had no gap in employment.
[He] makes no mention of anything
that he could—or would—have done differently to find employment had he known
the true basis of his Walmart rejections. Logically, it seems that he did
exactly what he should have done, had he known about the self-disclosure code—disclose
the conviction to the new employer before being hired. And he got hired. As
above, [he] fails to identify any evidence in the record that he could have
used the withheld information to do anything differently during his job search.
. . . So he has not suffered any
downstream consequences to his broader job search, either.
The Court also rejected his argument that he was injured
from denial of procedural due process. “A private employer—even in a contract
with one of its employees—cannot alone create the kind of “legitimate claim of
entitlement” to a property interest that the state has the power to confer.”
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
