FCRA Class Actions: How a Credit Reporting Class Action Works

By The Kim Law Firm, LLC

A class action is a lawsuit in which one or more individuals sues a defendant on behalf of a larger group, known as the “class.”  The result of that lawsuit is then binding on everyone who is a member of the class.  Although it is possible to sue a class of defendants, a class action more frequently is brought on behalf of a class of plaintiffs, all of whom have suffered similar injuries at a defendant’s hands.  These kinds of lawsuits are often seen when people have been harmed by defective products, consumer fraud, securities fraud, or employment discrimination.  Typically they are handled by attorneys with extensive class action experience.

Why file a class action instead of an individual lawsuit?

The primary benefit to class actions is their efficiency.  In circumstances where there could be numerous plaintiffs, so that it is impractical to litigate all their claims separately, a class action consolidates all the elements of the case in one court – attorneys, defendants, witnesses, evidence, and a judge who is familiar with all the details.  The class action device also makes it possible to hold wrongdoers accountable where each person’s injury is too small to make an individual lawsuit economically feasible.  The value of the case increases significantly when all claims are pooled together, lowering the usually high cost of litigation.

Why the Fair Credit Reporting Act lends itself to class actions

Many consumer class actions are brought under the Fair Credit Reporting Act (FCRA). The reason is the statute’s remedy. When a company willfully violates the FCRA, each affected consumer can recover either actual damages or statutory damages of not less than $100 and not more than $1,000, plus punitive damages the court allows, costs and reasonable attorney’s fees (15 U.S.C. § 1681n(a)). Because the statutory amount does not depend on each person proving a separate loss, one practice repeated across thousands of consumer files can be decided once for everyone it touched.

FCRA class actions usually grow out of a standard form or a standard procedure that a company uses for everyone. Common examples:

• Employment background check disclosures. Before an employer gets a background check on an applicant, it must give a clear written disclosure in a document that consists solely of the disclosure (15 U.S.C. § 1681b(b)(2)(A)(i)). A disclosure buried in a job application is the same defect for every applicant who signed it.
• Pre-adverse action notices. Before an employer rejects someone based even partly on a background report, it must give the person a copy of the report and a written summary of FCRA rights (15 U.S.C. § 1681b(b)(3)(A)). Skipping that step is usually a policy, not a one-time mistake.
• Reporting procedures. When a credit reporting agency or background check company uses the same matching or reporting procedure for every file, an error built into that procedure can repeat in every report it produces.

How does a class action get started?

A class action begins when an individual or small group of individuals files a lawsuit and requests that the court certify a class, with them as class representatives.  Before allowing the case to proceed as a class action, the court must decide, among other things, that:

• the class is so numerous that joining all members to the lawsuit is impracticable;
• there are questions of law or fact common to the class;
• the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
• the representative parties will fairly and adequately represent the interests of the class.  (See Federal Rule of Civil Procedure 23 and Pennsylvania Code Rule 1702.)

Once the court certifies a class, all members of the class are entitled to notice of the lawsuit.  The class representatives are responsible for notifying potential class members.  Depending on the circumstances, this notice can take a variety of forms:

• television ads;
• newspaper ads;
• posted flyers;
• individual mailings; and
• email.

Once an individual receives notice, she may be required to notify the court that she wishes to “opt in” – that is, join the class.  More likely, however, is that the class will include all individuals who do not specifically “opt out” – that is, notify the court that they wish to pursue their own individual lawsuits.

What happens when a class action ends?

When a class action concludes, the results bind all members of the class, even if they have not directly participated in the lawsuit.  If there is a judgment against the defendant, the court will work with the lawyers and parties to develop a plan to distribute any recovery to the class members.  If the parties decide to settle, the court must approve any settlement. If the defendant wins, none of the class members can sue on their own in the future. 

Talk to a lawyer about an FCRA class action

If a credit reporting agency, background check company or employer handled your report the same way it handles everyone’s, your claim may belong in a class action. If the problem is an error on your own credit report, start with a credit report lawyer. You pay nothing unless we win. Call (855) 996-6342.

Common questions

What is an FCRA class action?

A lawsuit brought by one or more consumers on behalf of a group of people affected by the same Fair Credit Reporting Act violation, such as a background check disclosure form used for every applicant.

How much can each class member recover in an FCRA class action?

For a willful violation, each consumer can recover actual damages or statutory damages of not less than $100 and not more than $1,000, plus any punitive damages the court allows. The defendant also pays costs and reasonable attorney’s fees.

Do I have to join an FCRA class action to be part of it?

Usually not. In most class actions the class includes everyone who fits the class definition unless they opt out to pursue their own claim.

Admitted in Pennsylvania and New Jersey; available to appear pro hac vice in other federal courts.