SCOTUS Rules Actual Harm Must Be Present for FCRA Litigation
May 19, 2016
On Monday, 05/16/16, the Supreme Court of the United States ruled in the Spokeo v. Robins case that there must be an injury (actual harm) before a plaintiff can sue for violations of the Fair Credit Reporting Act (FCRA). SCOTUS overturned the commonplace argument that a statutory violation is ipso facto an injury.
This decision will have a major impact not just on the background screening industry, but also on other industries where statutory violations without actual harm often result in class action lawsuits with huge price tags.
The case centered around the argument that a technical violation of one of the FCRA’s statutes was enough to bring suit against a negligent company. Robins alleged that Spokeo (a website which aggregates data about people) published inaccurate information about him--a clear violation of the FCRA’s requirements for reasonable procedures to ensure accuracy in reporting. The crucial point of debate in this case, however, was the fact that Robins could not prove any actual injury, i.e. any concrete harm.
SCOTUS ruled that a technical violation in and of itself was not enough to constitute a concrete harm. But if you pay close attention to the language of the judgement, you will notice that SCOTUS is not saying that procedural violations are never enough to bring suit; rather, a procedural violation that results in no harm is not enough to bring suit. If, for example, a technical violation of the FCRA does in fact lead to actual injury, e.g. loss of job, denial of employment opportunity, loss of potential earnings, then it is fair game for litigation. This is an important point for all companies and consumers to keep in mind.
The ruling is being hailed as a victory for the background screening industry, which has seen a dramatic rise in the number of class action lawsuits based on procedural or technical violations of FCRA regulations, sometimes resulting in concrete harm, sometimes not. In light of this new ruling, we expect to see a slowdown in FCRA litigation.
But this is not a green light for credit reporting agencies (CRAs) to loosen their grip on strict FCRA compliance. Technical violations still represent a negligence on the part of CRAs, and they should be doing all that they can to enact strict legal compliance to protect themselves, their clients, and, more importantly, to protect consumers.