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4th Cir. Holds FCRA Furnisher Liability Claim Not Viable Against Federal Gov’t

The U.S. Court of Appeals for the Fourth Circuit recently held that a trial court lacked jurisdiction over a claim for violation of the federal Fair Credit Reporting Act involving a student loan administered by the U.S. Department of Education because Congress did not waive sovereign immunity for suits under FCRA.

A copy of the opinion in Robinson v. U.S. Department of Education is available at:  Link to Opinion.

This appeal arose from the plaintiff’s claim that the government agency responsible for administering the federal student loan program violated FCRA, 15 U.S.C. § 1681, et seq.

The plaintiff alleged that the government agency violated 15 U.S.C. § 1681s-2(b), which requires a furnisher after being notified that a consumer disputes information relating to his credit to “conduct an investigation with respect to the disputed information.”  His dispute concerned an allegedly fraudulent student loan in his name.

The government agency filed a motion to dismiss for lack of subject matter jurisdiction based on sovereign immunity.  The trial court granted the motion to dismiss.

The only issue on appeal was whether the United States waived sovereign immunity for suits alleging that the federal government willfully or negligently violated FCRA.

As you may recall, the Supreme Court of the United States has recognized that sovereign powers have “traditionally enjoyed” a “common-law immunity from suit.” Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978).  “Absent a waiver, sovereign immunity shields the Federal Government and its agencies from suit.”  FDIC v. Meyer, 510 U.S. 471, 475 (1994).

“A waiver of the Federal Government’s sovereign immunity must be unequivocally expressed in statutory text and will not be implied.”  Lane v. Pena, 518 U.S. 187, 192 (1996).  Waivers cannot contain an ambiguity, which “exists if there is a plausible interpretation of the statute that would not authorize money damages against the Government.”  FAA v. Cooper, 566 U.S. 284, 290-91 (2012).

On appeal, the Fourth Circuit first noted that FCRA’s causes of action for willful and negligent violations apply to any “person.”  15 U.S.C. §§ 1681n-1681o.

The statute itself defines “person” to include “any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.”  15 U.S.C. § 1681a(b).

The plaintiff argued that because the federal government is a “government,” and any “government” is a person, and as any “person” can be liable, the government agency can be liable for FCRA violations.

The Fourth Circuit disagreed, explaining that the word “person” should not be interpreted on a blank state because there is a “longstanding interpretative presumption that ‘person’ does not include the sovereign.”  Vt. Agency of Nat. Res. v. U.S. ex. rel. Stevens, 529 U.S. 765, 780 (2002).

Although § 1681a(b)’s definition of a “person” includes the term “government,” the Fourth Circuit observed that the federal government is ordinarily not considered to be a person under 1 U.S.C. § 1 (general definition of “person” throughout the United States Code).

The Fourth Circuit further observed that statutes waiving sovereign immunity are normally quite clear, citing the Little Tucker Act (28 U.S.C. § 1346(a)(2)) and the Federal Tort Claims Act (28 U.S.C. § 2674), both of which specifically describe claims against the United States.

The definition section on which the plaintiff relied did not specifically mention the United States or the federal government.  Instead, it described only liability against a “person.”

This, as the Fourth Circuit explained, was “hardly evidence of an unequivocal intent to waive federal sovereign immunity in the same way as statutes that specifically describe actions against the United States.”

The Fourth Circuit also addressed one explicit waiver of sovereign immunity elsewhere in FCRA that did not apply to the plaintiff’s claims.

Section 1681u empowers the Federal Bureau of Investigation to obtain information from consumer reporting agencies in connection with its counterterrorism efforts. This section contained a clear waiver:  “Any agency or department of the United States obtaining or disclosing any consumer reports, records, or information contained therein in violation of [§ 1681u] is liable to the consumer to whom such consumer reports, records, or information relate” for statutory, actual, and sometimes punitive damages.  15 U.S.C. § 1681u(j).

Unlike the asserted waiver on which the plaintiff relied, the Fourth Circuit described the waiver in § 1681u(j) as “plain as day.”

The Fourth Circuit also noted that federal agencies are sometimes required by law to report delinquent debts to the consumer reporting agencies.  Each report would give rise to potential liability under FCRA.  The true cost of a waiver could be enormous when considering the potential for punitive damages.

The Fourth Circuit further noted FCRA empowers the Federal Trade Commission and the Consumer Financial Protection Bureau to enforce its various provisions.  States also play a role in enforcing FCRA’s various provisions.  Thus, a waiver would permit federal agencies and states to pursue punitive damages against the federal government.

The Fourth Circuit concluded that “FCRA’s text and structure make clear that no unambiguous and unequivocal waiver of sovereign immunity has taken place,” as required.

Accordingly, the Fourth Circuit affirmed the trial court’s dismissal of the case for want of subject matter jurisdiction.

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Eric Tsai practices in Maurice Wutscher’s Commercial Litigation and Consumer Credit Litigation groups, and in its Regulatory Compliance group. He concentrates his practice primarily on the defense of consumer and commercial financial services companies, including mortgage lenders and servicers, mortgage loan investors, third party debt collectors, and other financial services providers. He also counsels clients on regulatory compliance, licensing, and other consumer protection matters. Eric earned his undergraduate degree from the University of California, Irvine. Prior to attending law school, he worked as a loan officer for national direct lenders. He earned his Juris Doctor from California Western School of Law and thereafter obtained a Master of Laws (LLM) in Taxation from the University of San Diego School of Law. Eric publishes extensively on various issues affecting consumer lending and litigation, including both federal and California-specific developments. He is licensed to practice law in California, Nevada, and Oregon, and is admitted in all United States District Courts in the State of California, the United States District Court for the District of Oregon, the United States District Court for the District of Nevada, the U.S. Tax Court, and the Ninth Circuit Court of Appeals. He is also a licensed real estate broker in the State of California.

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