Court Rules that FACTA Eliminated a Private Right of Action for Violations of the FCRA
By Jason Hicks
A recent United States District Court opinion in the Northern District of Indiana reiterated the thus far unanimous view among courts that the 2003 Fair and Accurate Credit Transaction Act (FACTA) has eliminated the private right of action to enforce the disclosure provisions of section 1681m of the Fair Credit Reporting Act (FCRA). See Bruce v. Wells Fargo Bank, N.A., No. 2:05 CV 243 PS, 2006 WL 1195210 (N.D. Ind., 5/2/06). The outcome of the decision hinged on the court's interpretation of FACTA, which amended the FCRA in 2003. The court determined that the enforcement responsibilities of section 1681m now fall within the exclusive domain of federal agencies and officials.
As noted in the opinion, the FCRA imposes limits on a creditor's ability to access a consumer's credit report without the consumer's authorization. In order to access a credit report without the consumer's authorization, a creditor must extend a "firm offer of credit" to the consumer. The "firm offer" must contain certain "clear and conspicuous" statements, one of which is that "the consumer has the ability to prevent future use of his credit report for pre-screening purposes." Bruce, 2006 WL 1195210, at *1. See 15 U.S.C. section 1681m(d)(1) (listing "clear and conspicuous statement" disclosure requirements).
While section 1681n creates a private right of action for willful violations of the FCRA, the Bruce court held that FACTA eliminated the private right of action by adding a new subsection, section 1681m(h)(8), entitled "Enforcement." The subsection has two components. First, it says that section 1681n does not apply to any person who fails to comply with "this section." Second, it says that "this section" is to be enforced under section 1681s by "the Federal agencies and officials identified in that section." Therefore, the issue addressed in Bruce is whether the phrase "this section" in the new subsection applies to section 1681m as a whole or only a particular portion of section 1681m.
The case arose after the plaintiff in Bruce issued a complaint alleging that Wells Fargo targeted certain consumers through a mailing with offers to refinance their mortgages after it had prescreened the consumers to determine if they fit within a certain credit rating. The plaintiff alleged that Wells Fargo violated section 1681m because the company's mailing failed to disclose certain rights of the plaintiff in a "clear and conspicuous" manner. Consequently, the plaintiff sought statutory relief, claiming that Wells Fargo willfully violated section 1681m. However, Wells Fargo moved to dismiss the complaint under Rule 12(b)(6) on the premise that no private right of action exists under section 1681m as a result of the enactment of FACTA.
In siding with Wells Fargo that FACTA applies to section 1681m as a whole, the court relied primarily on what it considered to be the "plain and unambiguous language" of the statute. It noted that "Congress, for better or worse, has taken the enforcement of the statute away from private attorneys general and instead has tasked federal agencies to enforce section 1681m." The court concluded that "any private right of action for a violation of section 1681m has been eliminated."
As noted in the opinion, the FCRA imposes limits on a creditor's ability to access a consumer's credit report without the consumer's authorization. In order to access a credit report without the consumer's authorization, a creditor must extend a "firm offer of credit" to the consumer. The "firm offer" must contain certain "clear and conspicuous" statements, one of which is that "the consumer has the ability to prevent future use of his credit report for pre-screening purposes." Bruce, 2006 WL 1195210, at *1. See 15 U.S.C. section 1681m(d)(1) (listing "clear and conspicuous statement" disclosure requirements).
While section 1681n creates a private right of action for willful violations of the FCRA, the Bruce court held that FACTA eliminated the private right of action by adding a new subsection, section 1681m(h)(8), entitled "Enforcement." The subsection has two components. First, it says that section 1681n does not apply to any person who fails to comply with "this section." Second, it says that "this section" is to be enforced under section 1681s by "the Federal agencies and officials identified in that section." Therefore, the issue addressed in Bruce is whether the phrase "this section" in the new subsection applies to section 1681m as a whole or only a particular portion of section 1681m.
The case arose after the plaintiff in Bruce issued a complaint alleging that Wells Fargo targeted certain consumers through a mailing with offers to refinance their mortgages after it had prescreened the consumers to determine if they fit within a certain credit rating. The plaintiff alleged that Wells Fargo violated section 1681m because the company's mailing failed to disclose certain rights of the plaintiff in a "clear and conspicuous" manner. Consequently, the plaintiff sought statutory relief, claiming that Wells Fargo willfully violated section 1681m. However, Wells Fargo moved to dismiss the complaint under Rule 12(b)(6) on the premise that no private right of action exists under section 1681m as a result of the enactment of FACTA.
In siding with Wells Fargo that FACTA applies to section 1681m as a whole, the court relied primarily on what it considered to be the "plain and unambiguous language" of the statute. It noted that "Congress, for better or worse, has taken the enforcement of the statute away from private attorneys general and instead has tasked federal agencies to enforce section 1681m." The court concluded that "any private right of action for a violation of section 1681m has been eliminated."
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