Appeals Court Rules Gov’t Liable for FCRA Violations

The Court of Appeals for the Third Circuit has reversed a lower court’s dismissal of a Fair Credit Reporting Act lawsuit, ruling that the federal government does not have sovereign immunity from the statute’s civil liability provisions, widening a split at the Appellate level that seems destined to be resolved by the Supreme Court.

A copy of the ruling in the case of Kirtz v. TransUnion, Pennsylvania Higher Education Assistance Agency, the United States Department of Agriculture, and the Rural Housing Service can be accessed by clicking here.

The plaintiff obtained two loans — a student loan and a loan offered by the USDA to promote safe and affordable housing in rural communities. The plaintiff claims that both loans were closed with a $0 balance, but both were being reported as “120 days past due” on his credit report. The plaintiff disputed the debts, but, according to the plaintiff, neither entity took any action to investigate or correct the disputed information.

The plaintiff filed suit, alleging both parties violated Section 1681n and 1681o of the FCRA. The USDA filed a motion to dismiss, claiming sovereign immunity, a claim with which a District Court judge chose to agree.

The Fourth and Ninth Circuits have previously ruled that the federal government may not be held liable for violations of the FCRA, while the D.C. and Seventh Circuits have ruled that the plain language of the FCRA waives the government’s sovereign immunity defense.

Siding with the D.C. and Seventh Circuits, the Third Circuit determined that Congress intended not to exempt the federal government when it enacted the FCRA, because the statute defines the term “person” to include “any government of governmental subdivision or agency.” In other sections of the FCRA, Congress chose a different or narrower definition of “person.”

“We presume, therefore, that Congress’s failure to do so in §§ 1681n and 1681o was deliberate and intended to convey the full statutory definition,” the Appeals Court wrote. “And that presumption is buttressed by the fact that § 1681n clearly distinguishes between ‘natural person’ and the statutorily-defined term ‘person.’ Together, these statutory provisions demonstrate that Congress intended for the term ‘person’ in the civil liability provisions to carry its expressly defined meaning, rather than a narrower or a colloquial meaning.”

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