FCRA Newsletter - September 14, 2011

Employee Applicant Confuses FCRA Employer Notice Requirements in Adverse Use of Credit Report

John D. Reinke v. Cargill, Inc., 2011 U.S. Dist. LEXIS 66313 (E.D. Wis. June 21, 2011)

Facts: Plaintiff claimed that Defendant Cargill, Inc. ("Cargill") violated his rights under the FCRA when it rescinded an offer of employment based on information obtained from a consumer report. Plaintiff began working as a temporary employee at Cargill and applied three months later for a permanent position. Upon receiving the application, Cargill obtained Plaintiff's consumer report that contained personal financial, credit and other private information including his conviction record. The consumer report inaccurately stated that the Plaintiff was convicted of intentional homicide when in fact he was convicted of reckless homicide. Cargill mailed the Plaintiff a conditional offer letter stating that it had obtained a consumer report on him, and enclosed a copy of the consumer report and a statement of the Plaintiff's rights under the FCRA. The letter did not identify from which reporting agency the report came or any information on how to contact the agency. It also did not state that Cargill could rescind its offer of employment or take any other adverse action on his employment based on the consumer report. In the days that followed, Cargill rescinded its offer of employment to Plaintiff. Plaintiff filed suit, claiming among other allegations, (1) that Cargill failed to notify Plaintiff that it may take adverse action on the Plaintiff's employment status based on information contained in the report; (2) that Cargill failed to identify the person or agency that provided the consumer report, and (3) that Cargill failed to provide information about how Plaintiff could contact the person or agency that provided the report. Cargill filed its partial motion to dismiss all 3 of these claims. The court agreed and granted Cargill's motion in its entirety.

Motion to Dismiss Response Requirements. If a defendant seeks a motion to dismiss, the plaintiff must support in its response to the motion any and all claims it seeks to advance at trial. Any allegation not supported in plaintiff's response to defendant's motion to dismiss is waived. Accordingly, because Plaintiff did not respond to Cargill's motion to dismiss on the three claims, the court found that Plaintiff waived his right to have those claims go forward in the litigation. Note: Regardless of this ruling, the Court nevertheless found it important to address the merits of Cargill's motion. Pre-Adverse Action Notice Requirements. Pursuant to § 1681b, before taking an adverse action based on an applicant's consumer report, the employer must provide the applicant with (1) a copy of the report, and (2) a description in writing of the applicant's rights under the FCRA. If the employer fails to provide the applicant with either of these two items, either willfully or negligently, the applicant may file a private suit against the employer. Post-Adverse Action Notice Requirements. Pursuant to § 1681m(a)(1)-(2), if an employer takes adverse action against the applicant by refusing to hire him, the employer must provide the applicant with: (1) notice of the adverse action; (2) the contact information for the consumer reporting agency that furnished the report and a statement that the reporting agency did not make the decision to take adverse action; and (3) notice of the consumer's rights to obtain a free copy of the report and to dispute the accuracy or completeness of any information. If the employer fails to provide the applicant with any of this information, the applicant may file grievances only with federal agencies or officials identified by the FCRA. The applicant may not file a private suit against the employer. Note: The Court noted that in granting Cargill's motion, Plaintiff appeared to confuse pre-adverse action notice requirements and post-adverse action notice requirements under the FCRA, alleging that Cargill did not follow post-adverse action notice requirements in the pre-adverse action stage. Accordingly, even when taking all inferences in favor of Plaintiff, the Court found that the disputed claims failed as a matter of law. Furnisher Complies With its Investigation Duties When Notified Directly by a Consumer Reporting Agency

Glen Llewellyn v. Allstate Home Loans, Inc. d/b/a Allstate Funding, et al., 2011 U.S. Dist. LEXIS 63607 (D. Co. June 16, 2011)

Facts: Plaintiff brought a FCRA claim and Outrageous Conduct claim against Defendants Ocwen Loan Servicing, LP ("Ocwen") and its parent company, Nomura Credit and Capital, Inc. ("NCCI") because of their negative credit reporting of Plaintiff's mortgage payment history to the consumer reporting agencies ("CRAs"). Plaintiff refinanced a mortgage loan, but the company servicing the original loan, Ocwen, did not receive the refinancing proceeds intended to pay off the loan. When Plaintiff understandably stopped making monthly payments on the original loan, Ocwen understandably began treating the original loan as in default and started reporting negative information to the CRAs. Plaintiff's FCRA claims under § 1681s-2(b) alleged that Ocwen furnished inaccurate credit information to the CRAs and failed to conduct a reasonable or timely investigation after receiving notice from the CRAs that Plaintiff had disputed the credit information. Ocwen and NCCI filed their motion for summary judgment, claiming that such FCRA claims should be dismissed because they accurately reported the loan as being in default (because Ocwen was never paid), and that Ocwen's investigation complied with the statute. The Court agreed.

Furnisher Duty. Ocwen's duty under § 1681s-2(b) to conduct an investigation was not triggered until it was notified by a CRA of a...