On January 21, 2026, The New York Times reported that a proposed class action lawsuit was filed in California by two job applicants who argue that an AI-based hiring tool violated their rights under the Fair Credit Reporting Act (FCRA). The proposed class action litigation is important because it seeks to test the bounds of federal law regarding artificial intelligence (AI) tools. At The Kim Law Firm, LLC, our credit report error lawyer has considerable experience handling FCRA cases.

Background: What is the Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) is a federal law that protects consumers from inaccurate, unfair, or outdated information in their credit reports. Congress enacted the statute in order to help promote accuracy, fairness, and privacy in the nation’s credit reporting system. As credit reports are extremely important for a consumer’s financial standing, the law matters. Notably, it applies to all three of the major credit reporting agencies (Equifax, Experian, and TransUnion). It also governs companies that furnish information to those agencies, including banks, lenders, debt collectors, and even some employers. If a company reports false information about you or fails to properly investigate a dispute, it may violate federal law. 

The FCRA includes a private right of action. That means that it gives you enforceable rights and provides remedies when those rights are ignored. Under the FCRA, you have the right to obtain a copy of your credit report, dispute inaccurate entries, and demand a reasonable investigation. Credit reporting agencies must correct or delete information that cannot be verified. The law also restricts who may access your report and requires certain disclosures before an employer can use it for hiring decisions. If a company willfully or negligently violates the statute, you may recover actual damages, statutory damages, attorney’s fees, and potentially even punitive damages.

How the FCRA Applies in the Hiring Process

As noted previously, an employer can potentially be covered by the FCRA. The federal law regulates the use of consumer reports and investigative consumer reports for employment purposes. When an employer obtains a background check from a third party, that report qualifies as a consumer report under 15 U.S.C. § 1681a(d). Employers are required to satisfy specific legal regulations. Here is the big FCRA requirement for employers: 

• Before procuring a credit report, an employer must provide a clear and conspicuous written disclosure in a standalone document stating that it may obtain a consumer report for employment purposes. The employer must obtain the applicant’s written authorization.

If an employer intends to take adverse action based in whole or in part on information contained in a consumer report, the FCRA imposes a two-step notice process under 15 U.S.C. § 1681b(b)(3). First, the employer must provide a pre-adverse action notice that includes a copy of the report and a summary of rights under the FCRA. It is a step that gives a job applicant a meaningful opportunity to dispute inaccuracies before a final decision. After a reasonable waiting period, assuming that the employer proceeds, it must issue a formal adverse action notice.

Note: The FCRA also regulates the conduct of consumer reporting agencies that prepare employment background checks. Agencies must follow reasonable procedures to ensure maximum possible accuracy. For investigative consumer reports, which involve interviews about character or reputation, the FCRA requires additional disclosures under 15 U.S.C. § 1681d. Employers and background screening companies that fail to comply face liability for actual damages, statutory damages for willful violations, attorney’s fees, and, potentially, punitive damages. 

Proposed Class Action Lawsuit: AI Hiring Tool and FCRA (Eightfold AI Inc.)

Artificial intelligence (AI) has already started to transform hiring. For businesses and organizations, one big promise is that AI-related tools can help them sift through large applicant pools with advanced algorithmic screening. Among other things, these types of systems can analyze résumés, match skills to job requirements, and generate predictive scores that rank candidates based on their “likelihood of success” in a role. Indeed, many companies now use AI-based platforms to augment or even replace parts of the traditional hiring pipeline. While these innovations promise efficiency, they also raise some very serious legal questions when they rely on extensive personal data and produce evaluations that influence who gets a job. It is this tension that lies at the heart of a newly filed lawsuit against Eightfold AI Inc. 

In January of 2026, two job applicants filed a proposed class action lawsuit in California state court against Eightfold AI, alleging that the company’s AI hiring tools violate federal and state consumer reporting laws. The proposed class action alleges a violation of the federal FCRA and seeks the certification of a nationwide class of plaintiffs. What are the specific allegations? 

• The complaint alleges that Eightfold’s system compiles detailed profiles about job seekers by pulling data from sources beyond what applicants voluntarily provide, such as online professional profiles and third-party databases. The plaintiffs contend that Eightfold uses this data to generate a numerical “Match Score” and other assessments that employers allegedly use to screen candidates before any human review. According to the proposed class action lawsuit, these evaluations function similarly to “consumer reports” under the FCRA because they contain information about an applicant’s personal characteristics and are furnished to employers for employment decisions.

The core of the legal claim is that Eightfold and its employer clients failed to comply with FCRA’s procedural safeguards. Under the statute, entities that prepare or furnish consumer reports must disclose that a report will be obtained, secure the subject’s written authorization, and provide access to the report along with a summary of rights before an adverse employment decision. The complaint alleges that Eightfold did none of these things: applicants were neither informed that their data was being collected and evaluated nor given the opportunity to review or correct information used to generate their Match Scores. In addition to FCRA claims, the lawsuit also asserts violations of the California Investigative Consumer Reporting Agencies Act (ICRAA) and seeks statutory and punitive damages on behalf of all similarly situated job seekers.

Understanding the FCRA Protections 

Protections Against an AI Company

When an employer uses an AI hiring tool to evaluate applicants, the FCRA may apply. However, it will depend on the specific circumstances. The FCRA is implicated if the tool compiles information about you and provides it to an employer for an employment decision. The statute does not turn on whether the report comes from a traditional credit bureau. It turns on whether a third party assembles information about your character, general reputation, personal characteristics, or mode of living and furnishes it for employment purposes. If an AI platform aggregates résumé data, online profiles, employment history, or other background information and generates a score or ranking that influences hiring, that output may qualify as a consumer report under 15 U.S.C. § 1681a(d). In that situation, you have the right to receive a clear, standalone disclosure and to provide written authorization before the employer obtains the report.

Protections Against an Employer

You also have specific procedural protections that will come into play if and when an employer intends to rely on that report to deny you a job. Before taking adverse action, the employer must provide you with a copy of the report and a Summary of Your Rights under the FCRA. This pre-adverse action notice gives you the opportunity to dispute inaccurate or incomplete information. The reporting company must conduct a reasonable reinvestigation if you challenge the data. If the violation is willful, you may pursue compensation for your damages and, potentially, additional damages. An experienced FCRA lawyer can help you determine the best course of action if your consumer rights were violated. 

The Potential Implications for this Proposed FCRA Class Action

If a court determines that an AI hiring platform such as Eightfold’s qualifies as a “consumer reporting agency” under 15 U.S.C. § 1681a(f), the implications will be immediate and significant. AI vendors would need to restructure onboarding, disclosure, authorization, and dispute procedures to comply with the FCRA’s strict statutory requirements. Employers that rely on algorithmic match scores or predictive rankings could face direct liability for failing to provide standalone disclosures and pre-adverse action notices. Even technical violations carry statutory damages of $100 to $1,000 per violation for willful noncompliance, plus punitive damages and attorney’s fees. 

The case also tests whether modern algorithmic scoring constitutes a “consumer report” when used for employment eligibility decisions. A ruling in favor of the plaintiffs could force AI hiring companies to dramatically increase transparency, provide additional access to underlying data, and to implement meaningful dispute mechanisms. That would reshape compliance expectations across the AI-driven hiring industry.

How Consumers Can Use the FCRA to Protect their Rights and their Interests 

The FCRA gives consumers practical tools to correct errors and hold companies accountable. To be clear, you do not have to accept inaccurate credit reporting, flawed background checks, or secretive employment screening. The statute creates affirmative rights and imposes enforceable duties on consumer reporting agencies and data furnishers. When you act promptly and document your efforts, you preserve evidence and strengthen your position. A proactive approach often determines whether a problem gets fixed quickly or turns into a legal claim. As a consumer, you can best protect your rights under the FCRA by taking the following steps: 

• Request and Review Your Credit Reports Regularly: To start, you should obtain your credit reports and any employment background reports. It is important to review things like account histories, public records, and personal identifiers for inaccuracies. Review matters. 
• Dispute Errors in Writing: You can and should send a written dispute to the reporting agency and the furnisher. It is a best practice to carefully and clearly identify each inaccurate item and demand a reasonable reinvestigation. 
• Preserve All Relevant Communications: Documentation is key for a successful FCRA claim. It is important to keep copies of dispute letters, delivery confirmations, and responses. You need to maintain a timeline of events that is reliable. 
• Be Prepared to Demand Pre-Adverse Action Compliance: If an employer relies on a report, insist on receiving a copy before any final decision.
• Consult an FCRA Attorney if Violations Persist: Willful or negligent noncompliance may entitle you to actual damages, statutory damages, punitive damages, and attorney’s fees. An experienced FCRA lawyer can help you seek the maximum compensation for your damages. 

Richard H. Kim is a Leading FCRA Attorney

Your credit report matters. The FCRA is a powerful legal tool for consumers who have run into problems because of credit report errors and related issues. Under the law, consumers have statutory rights to accurate reporting, reasonable investigations of disputes, and compensation for damages caused by willful or negligent violations of the law. However, the legal process can be challenging to navigate. Richard H. Kim is a leading FCRA attorney with a passion for fighting for justice for consumers. Indeed, he founded The Kim Law Firm, LLC with a mission to protect consumers harmed by inaccurate credit reporting, unfair background checks, and violations of federal financial privacy laws. For more than two decades, Attorney Kim has litigated complex matters in both state and federal courts nationwide. He has extensive FCRA experience that consumers can trust. 

Contact Our Credit Report Error Lawyer Today for Help With an FCRA Claim

At The Kim Law Firm, LLC, our credit report error attorney has the knowledge, skills, and experience to handle the full range of Fair Credit Reporting Act cases. If you have any questions about AI-related job hiring processes and your rights under the FCRA, we are here as a legal resource. Call us today or contact us online to set up a completely confidential, no obligation initial consultation. We handle credit report error cases nationwide.