A good, bad, or questionable credit report can decide whether you can buy a house, buy a car, or get a credit card with a lower rate. And, increasingly, credit reports are also used by employers and landlords to eliminate potential employees and tenants from the list. The biggest problem with the power of credit reports over our lives? Credit reports are frequently riddled with devastating errors, and credit reporting agencies are one of the most complained-about industries in America. But a bill introduced by Rep. Barry Loudermilk, H.R. 2359, sides with the credit reporting agencies by limiting the consequences for those agencies when they willfully do Americans wrong.
The Fair Credit Reporting Act (FCRA) tries to fix the problem of inaccurate reporting by allowing wronged individuals to sue credit reporting agencies when the agencies willfully fail to have sufficient systems in place for assuring accuracy or fail to notify consumers that their reports are being used against them. The FCRA allows consumers to recoup their damages or, because damages from inaccurate credit reporting can be hard to quantify and prove, statutory damages of up to $1000. Further, when the credit reporting agencies’ actions are particularly heinous—for example, they know about errors and fail to fix them—courts can award punitive damages on top of actual or statutory damages.
Punitive damages play an important role in keeping deliberate or reckless inaccurate reporting to a minimum. The idea behind punitive damages is to up the ante for bad behavior, both as punishment and deterrence. We don’t have bank robbers simply hand over the money and then let them go free; we think sending them to jail is important to punish and deter, and punitive damages play the same role in civil litigation. In this context, deterrence means making it more expensive for companies to intentionally or recklessly report inaccurate consumer information. A company that might otherwise determine that it’s cheaper to provide inaccurate information and risk statutory damages must also weigh the cost of paying punitive damages.
H.R. 2359 would, in addition to limiting actual and statutory FCRA damages to $500,000, eliminate punitive damages under the statute altogether, making it even easier for credit reporting agencies to decide that it makes financial sense to screw over ordinary consumers and employees.
Courts don’t award punitive damages on a whim; courts award them when credit reporting agencies know they are reporting inaccurate information and do it anyway. Take, for example, the case of Richard Williams. Fresh out of college in the middle of the Great Recession, Richard had a tough time finding a job. And no wonder: He was rejected for a position at Rent-a-Center because First Advantage LNS Screening Solutions, Inc. incorrectly reported that he was cocaine dealer Ricky Williams. When Richard found out, he successfully disputed the errors and First Advantage corrected his report. But the story doesn’t end there. A year later, Richard was rejected for a job with Winn-Dixie because First Advantage had again matched Richard with a criminal record for a Ricky Williams, this time improbably reporting that Richard was in jail 300 miles away serving a sentence for felony burglary and battery. In other words, First Advantage knew that its system had incorrectly matched Richard Williams with a criminal name Ricky Williams and did it again anyway—with the result that Richard remained unemployed. Citing the “reprehensibility of First Advantage’s actions and the need to deter it from engaging in this type of conduct in the future,” the court had no trouble upholding the jury’s award of punitive damages.
A court also had no problem approving a punitive damages award for Angela Williams, who spent thirteen years trying to straighten out her Equifax credit reports. Her credit reports included 25 accounts that did not belong to her—some of which were delinquent. Angela filed dispute after dispute with Equifax, but to no avail: Her credit report continued to show someone else’s accounts. Unsurprisingly, Angela was pursued by debt collectors for debt she did not owe, her credit score plummeted, and she was repeatedly denied credit. Equifax took her case all the way to a jury trial, and the jury awarded Angela punitive damages based on Equifax’s repeated failure to correct known errors that upended Angela’s life for more than a decade.
The FCRA’s punitive damages work to minimize the kinds of known errors that plagued Richard and Angela, preventing them from access to jobs and credit. H.R. 2359 would eliminate one of the few financial incentives credit reporting agencies have to put systems in place to correct inaccuracies and fix systems that routinely produce errors. If Loudermilk’s bill becomes law, there will be more Richards and more Angelas, and the only winners will be the credit reporting agencies’ balance sheets.
This post was co-authored by Public Justice Staff Attorney Leah M. Nicholls.