FCRA Lawsuits Are on the Rise; What Can You Do To Protect Yourself?

Jul. 26 2021

Previously, we covered a rise in ADA-related lawsuits and provided a few actionable steps to assist with your compliance efforts. This week, we spotlight another type of litigation that’s gaining momentum — FCRA lawsuits.

What Is the FCRA and What Does It Do?

The Fair Credit Reporting Act (FCRA) is legislation aimed to ensure the accuracy, fairness, and privacy of consumer’s information contained in the files of the credit reporting agencies. The FCRA regulates consumer reporting agencies (CRA) and entities that obtain and use consumer credit information. While the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) handle enforcement and regulations, class action lawsuits from private citizens can result in hefty penalties to anyone violating the FCRA.

A common complaint under the FCRA is obtaining a credit report without a “permissible purpose.” The FCRA deems “permissible purpose” as the consumer giving direct consent. In the lead generation context, getting consent is the best and easiest way to comply with the FCRA. Other ways to comply may include:

  • To review a consumer’s creditworthiness in connection with a credit transaction
  • For employment purposes
  • For insurance underwriting
  • To determine a consumer’s eligibility for a license or other benefit granted by a government agency
  • For a lender to assess the risks associated with a consumer’s existing credit obligation
  • Has a legitimate interest and need to access this information
  • For executive departments and agencies that issue government-sponsored individually-billed travel charge cards

Lawsuit Are on the Rise and Show No Signs of Slowing Down

In 2020, consumers filed over 5,000 claims—that’s more than double from 10 years ago! Liability for intentional non-compliance could require you to cover the consumer’s actual damages, or up to $1,000 per incident, potential punitive damages, plus the plaintiffs’ attorney fees. In addition to being costly, a class-action lawsuit could seriously harm your reputation and jeopardize your future in the industry!

What Can You Do to Protect Yourself and Avoid Adverse Actions?

One of the best forms of protection against FCRA-related lawsuits is to obtain the consumer’s written consent to pull their credit report. If you use LeadsMarket’s javascript form, that consent is already built in. We use best practices to make sure our offers and creatives follow applicable laws and regulations. If you don’t use our forms, make sure you include proper disclosure language in your Terms of Use and website’s footer. Your website should contain clear authorization language that the applicant sees and agrees to when using your website. Here are some examples of good consent language:

  • Sample Terms of Use language: Participating lenders or lending partners may verify your social security number, driver’s license number, or other federal or state identification, as well as review your creditworthiness through national databases that may include Equifax, TransUnion, Experian, and other credit bureaus. By submitting your information to us, you agree that lenders or lending partners may obtain such credit reports and verify your information.
  • Sample Footer language: By submitting your information via this website, you are authorizing [domain] and its partners to do a credit check, which may include verifying your social security number, driver license number, or other identification, and a review of your creditworthiness. Credit checks are usually performed by one of the major credit bureaus such as Experian, Equifax, and TransUnion, but also may include alternative credit bureaus such as Clarity, FactorTrust, Microbilt, or others. You also authorize [domain] to share your information and credit history with a network of approved lenders and lending partners.

Final Thoughts

While legal issues can be difficult to navigate, it’s imperative to make compliance a priority to increase business performance and reduce risk. Failure to follow laws and regulations can have devastating results for your bottom line, so it’s in your best interest to take the time and make sure you’ve dotted your i’s and crossed your t’s to prevent litigation!

©2021 LeadsMarket.com LLC. This blog post is for educational and informational purposes only—LeadsMarket.com LLC cannot give you legal advice and there is no attorney-client relationship formed by reading or using this information. FCRA regulations and laws can be complicated, so please review with your legal counsel before starting or changing marketing strategies.

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