Landmark Supreme Court Ruling Allows Consumers to Pursue FCRA Claims Against Federal Agencies

Dep’t of Agric. Rural Dev. Rural Hous. Serv. v. Kirtz

In a groundbreaking decision, the United States Supreme Court, in the case of Dep’t of Agric. Rural Dev. Rural Hous. Serv. v. Kirtz, delivered a unanimous verdict, reshaping the landscape for consumer rights under the Fair Credit Reporting Act (FCRA). This pivotal ruling ensures that sovereign immunity does not shield federal agencies from consumer lawsuits seeking damages under the FCRA.

The Kirtz Case Unveiled: A David vs. Goliath Tale

The Kirtz case emerged from a consumer dispute with a consumer reporting agency (CRA) regarding a mortgage secured from the Rural Housing Service (RHS), a division of the U.S. Department of Agriculture (USDA). The plaintiff consumer alleged that the USDA, which supplied information to the CRA, failed to adequately investigate the dispute, potentially warranting damages against the USDA. The USDA invoked sovereign immunity and argued that consumers cannot make an FCRA claim and recover actual damages from federal agencies. However, the consumer argued that the FCRA’s language implicitly waives immunity. The lower district and circuit courts were divided across the country on this matter, with the Supreme Court stepping in to settle the issue for all courts. 

Unpacking the Supreme Court’s Decision: The FCRA Clearly Waives Sovereign Immunity

As it should, the Supreme Court, led by the principle that statutory language prevails over legislative history, unanimously concluded the FCRA waives sovereign immunity. The consumer, alleging violations under 15 U.S.C. § 1681s-2(b), which pertains to the furnisher’s (e.g., USDA’s), obligations to investigate consumer disputes found solid ground as FCRA §§ 1681n and 1681o which permit actual and statutory damages against “[a]ny person” failing to comply with its FCRA obligations.  Significantly, Section 1681a(b) broadly defines “person” to include “any … governmental … agency,” encompassing federal agencies. This decision establishes a precedent, which makes clear that consumers can pursue damages against federal agencies for violations of the FCRA. 

Kirtz’s Broad Reach: A Warning Bell for Federal Agencies

Crucially, the impact of Kirtz extends far beyond the USDA. This landmark decision signifies that sovereign immunity has been waived for FCRA claims against any federal agency furnishing information to CRAs and neglecting the reasonable investigation of consumer disputes received from CRAs. From the Department of Veterans Affairs to the Department of Education and the Social Security Administration, this ruling casts a wide net over all federal agencies providing information to CRAs, not limited to credit-related data. Think of school loans opened by identity thieves and credit reported by the Department of Education, or its services, to the CRAs. Now, under Kirtz, the Department of Education will not be able to escape liability for its failure to perform reasonable investigations of identity theft victims’ disputes made to the CRAs.

Navigating FCRA Claims Beyond Federal Jurisdiction

While federal agencies are now clearly subject to liability for violations of the FCRA, the Kirtz decision does not change the landscape for state and local agencies. Congress, bound by the Eleventh Amendment, cannot abrogate sovereign immunity for FCRA claims against the states. This immunity extends to state agencies, shielding them from FCRA-related lawsuits in federal courts. However, the scenario becomes nuanced when dealing with local and quasi-government entities. Determining whether they qualify as “arms of the state” and enjoy sovereign immunity demands a case-by-case evaluation, with the burden of proof resting on the entity asserting immunity. Even when federal courts are closed to FCRA claims, a potential avenue opens in state courts against state agencies.

Beyond FCRA: Kirtz’s Ripple Effect on Statutory Claims

Kirtz doesn’t stand alone. This ruling sets a precedent that could extend to other federal statutes mirroring the FCRA. Any statute imposing obligations and remedies against “persons,” explicitly including governmental agencies, might find its sovereign immunity waived. The Equal Credit Opportunity Act, for instance, with its similar definition of “person,” could potentially be subject to the Kirtz logic.  In conclusion, Kirtz marks a seismic shift in the legal landscape, empowering consumers to hold federal agencies accountable under the FCRA and opens the door for other consumer claims under similar consumer protection statutes. The ruling is not merely a victory for one consumer; it’s a huge win for all consumers to be able to recover for credit reporting errors caused by federal agencies.

Got Errors on a Credit Report?

The Adkins Firm represents consumers who have errors on credit, employment background and tenant screening reports. We help our clients clear their names. Do you have errors on a credit report, background report or tenant screening report due to fraud?  Have you disputed the error and the fraudulent information was verified that it belongs to you? If you answered yes, then you may have a claim under the federal Fair Credit Reporting Act. Please note, there is a statute of limitations that may bar you from recovering for your damages. Don’t wait.  Contact us for a free case review.