Early Remarks Regarding 1681e[e]:Kodrick

David A. Szwak

Early Remarks Regarding 1681e[e]:Kodrick

Postby David A. Szwak » Mon Nov 07, 2005 11:49 pm

Kodrick v. Ferguson,
54 F.Supp.2d 788, N.D.Ill., Feb 16, 1999

Consumer brought action against loan officer and loan officer's former employer, alleging violations of Fair Credit Reporting Act (FCRA). Employer moved to dismiss. The District Court, Moran, Senior District Judge, held that employer was not liable under FCRA for its loan officer's unlawful actions in obtaining consumer's credit report under false pretenses and for personal use without express or implied approval of her supervisors.
Motion granted.

The FCRA does not explicitly impose requirements on "subscribers," i.e. those individuals or companies, like Accubanc, who contract with credit reporting agencies for the right to regularly access consumer information. There is no language in the statute, for example, requiring subscribers to limit requisition access to supervisors or other employees with special training regarding permissible purposes. Plaintiff contends that it is the new language in § 1681b(f) that imposes a duty on Accubanc to prevent willful violations (plf's mem. in opp. at 5). [FN2] This new provision provides that "[a] person shall not use or obtain a consumer report for any purpose unless (1) the consumer report is obtained for a purpose for which it is authorized to be furnished under this section; and (2) the purpose is certified in accordance with § 1681e of this title by a prospective user [FN3] of the report through a general or specific certification". 15 U.S.C. § 1681b(f). In the context of this motion no one disputes that Ferguson obtained the report herself, falsely certified the permissible purpose, and used the report for personal reasons. The question then is whether her unauthorized actions are also imputed to Accubanc such that the corporation itself has "obtained a consumer report" for an impermissible purpose and without the appropriate certification. Or, stated another way, is Accubanc deemed a "user" or "obtainer" any time its facilities are used to obtain a report?

FN2. Plaintiff also asserts that it is the criminal penalty provision at § 1681q that imposes on Accubanc "an affirmative duty to refrain from allowing its agents and officers from willfully obtaining credit reports under false pretenses" (plf's mem. in opp. at 12). She provides no support for this proposition and there is nothing in the text to support such an interpretation. While the pre-amendment case law disagreed as to whether § 1681q also created a private cause of action under § 1681o or § 1681n against those who obtained a consumer report under false pretenses, the new knowing non-compliance provision at § 1681n(b) appears to clarify congressional intent on this question. That is not the issue presented in this case, however.

FN3. Although the reference to "user" was eliminated from the civil liability provisions, the term is still used throughout the statute. "Using" a consumer information report, however, is generally distinguished from "obtaining" or "procuring" a report. For example, § 1681b establishes that employment screening is a permissible purpose for which a credit report may be furnished, and § 1681b(b) enumerates the special "[c]onditions for furnishing and using consumer reports for employment purposes." The text of § 1681b(b) establishes that the person who "obtains" the report has certification duties, as does the reporting agency who furnishes the report. It also establishes that the person who "procure [s]" a report or "cause[s] a report to be procured" has disclosure duties, as does any person who takes adverse action based on information in the report. A second example appears in § 1681e(e), which provides that "a person may not procure a consumer report for purposes of reselling the report... unless the person discloses to the consumer reporting agency that originally furnishes the report (A) the identity of the end-user of the report... and (B) which permissible purpose under section 1681b of this title for which the report is furnished to the end-user." Thus, the statute assigns unique responsibilities to those who furnish reports, to those who obtain or procure the reports, and to those who use them.

This, of course, is an agency question on which the statute remains silent. What do we take from this silence? Would Congress have wanted us to apply agency principles to determine employer liability here? If so, would it want the courts to create a uniform body of law on subscriber liability or instead rely on the agency law as it exists in the state forum? Or does the fact that the statute fills the agency gap as to other "requirements" suggest that Congress did not want to subject subscribers to this form of strict liability?

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