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11th Cir. Holds ‘Actual Damages’ Not Required for ‘Willful’ Violations of FCRA

fair credit reporting actThe U.S. Court of Appeals for the Eleventh Circuit recently held that a trial court’s denial of a motion for class certification was an abuse of discretion because the trial court’s analysis of Rule 23(b)(3)’s predominance requirement was based on its erroneous interpretation of the second option in section 1681n(a)(1)(A) of the federal Fair Credit Reporting Act as requiring a showing of actual damages.

In so ruling, the Eleventh Circuit concluded that a consumer alleging a willful violation of the FCRA does not need to prove actual damages to recover “damages of not less than $100 and not more than $1,000.” 

A copy of the opinion in Omar Santos, et al v. Experian Information Solutions, Inc. is available at:  Link to Opinion.

A group of consumers filed a putative class action complaint, seeking to represent a class of individuals whose tradelines reported by a specific debt collector had been wrongly “re-aged” by a credit reporting agency. They alleged that the credit reporting agency “willfully” violated its obligation under the FCRA to “follow reasonable procedures” to ensure consumer credit reports were prepared with “maximum possible accuracy” when it allowed credit reports to reflect allegedly inaccurate status dates. 

The trial court denied the credit reporting agency’s summary judgment motion. After the close of discovery, the consumers moved to certify a class of all consumers whose credit reports had an account or accounts reported by the debt collector with an inaccurately displayed “Date of Status” and were viewed by one or more third parties. The trial court adopted the magistrate judge’s recommendation and denied class certification. The consumers then petitioned for permission to appeal the trial court’s class certification order under Rule 23(f), which was granted.

As you may recall, where a consumer reporting agency willfully fails to comply with the requirements imposed on it under the FCRA, a consumer has two options to recover damages. The first option allows a consumer to recover “any actual damages sustained by the consumer as a result of the failure.” 15 U.S.C. § 1681n(a)(1)(A). And the second option allows a consumer to recover “damages of not less than $100 and not more than $1,000.” Id. The issue in this case was whether, under the second option, the consumer could recover “damages of not less than $100 and not more than $1,000” without proving actual damages caused by the agency’s willful violation of the FCRA. 

To answer this question, the Eleventh Circuit decided that it must determine the “ordinary meaning” of “damages” as used in the second option. See Wis. Cent. Ltd. v. United States, 138 S. Ct. 2067, 2070 (2018). Ultimately, the Court reasoned that the FCRA caselaw led to the conclusion that the second option does not require a consumer to prove they suffered actual damages. 

For instance, in Levine v. World Financial Network National Bank, the plaintiff sued a consumer reporting agency for willfully violating the FCRA. 437 F.3d 1118, 1123 (11th Cir. 2006). The trial court dismissed the suit because the plaintiff’s complaint hadn’t sought damages under the second option and his claimed injuries were “too amorphous” to recover actual damages under the first option. Id. at 1120. The Eleventh Circuit reversed, determining that, contrary to the trial court’s reading, the plaintiff’s complaint had sought “damages of not less than $100 and not more than $1,000.” Id. at 1123–25. And because the plaintiff stated a prima facie claim under section 1681n(a)(1)(A) and sought damages under the second option, there was no need to examine the plaintiff’s alleged injuries since the plaintiff’s allegation of willful noncompliance with the FCRA was itself an injury that section 1681n “clearly recognize[d] as compensable.” Id. at 1124– 25; see also Harris v. Mexican Specialty Foods, Inc., 564 F.3d 1301, 1309 (11th Cir. 2009).

Furthermore, the Eleventh Circuit noted that its reading was consistent with how the other circuits have read section 1681n(a)(1)(A). Specifically, the Court determined that every circuit to address the same issue has agreed that “the plain language of the provision permits recovery of statutory damages in the absence of actual damages.” Hammer v. Sam’s E., Inc., 754 F.3d 492, 499–500 (8th Cir. 2014); see also Beaudry, 579 F.3d at 705–06.

Accordingly, the Eleventh Circuit held that the denial of the consumers’ motion for class certification was an abuse of discretion because the trial court’s analysis of Rule 23(b)(3)’s predominance requirement was based on its contrary interpretation of the second option in section 1681n(a)(1)(A). Thus, the Appellate Court vacated the trial court’s denial of the motion for class certification and remanded for further proceedings.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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