Supreme Court Decides Fair Credit Reporting Act Case

The Fair Credit Reporting Act provides that a consumer may sue a business for actual damages if the business negligently violated the Act, but if the business willfully violated the Act, the consumer may sue for actual damage or statutory damages ranging from $100 to $1,000, and punitive damages. In cases in which actual damages are hard to prove, a consumer will be very interested in wanting to prove the defendant business “willfully” violated the Act in order to obtain statutory and punitive damages.

On June 4, 2007, the U.S. Supreme Court explained the meaning of the term “willful” as used in the Act in deciding a pair of class actions consumers had filed against GEICO and Safeco insurance companies. The Court held that to prove a willful violation, the consumer must show that business either knowingly or recklessly violated the statute. The Court said that recklessness in this context meant conduct involving an unjustifiably high risk of harm that is either known or so obvious that it should be known. Safeco v Burr, 2007 WL 1582951.

This decision strengthens cases in which consumers are seeking statutory and punitive damages against companies that furnish inaccurate credit information to credit bureaus. The decision will also strengthen consumers’ cases against credit bureaus that recklessly fail to correct inaccurate information in credit reports. The decision may especially be important in class actions in which the main object is to obtain statutory damages of $100 to $1,000 for each class member.

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