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The Fair Credit Reporting Act requires notice to any consumer subjected to adverse action based in whole or in part on any information contained in a consumer credit report.
In two consolidated cases, respondent applicants sued petitioner insurance companies under 15 U.S.C.S. § 1681n(a) for alleged violations of 15 U.S.C.S. § 1681m(a) of the Fair Credit Reporting Act (FCRA). The companies, which relied in part on credit scores to set insurance premiums, had offered the applicants auto insurance rates that exceeded the best rates possible. In each case, the district court granted summary judgment in favor of the companies, and the United States Court of Appeals for the Ninth Circuit reversed.
Does the liability under 15 U.S.C.S. § 1681n(a) apply to willfully failing to comply with the FCRA in reckless violations?
The Court found that liability under 15 U.S.C.S. § 1681n(a) for willfully failing to comply with the FCRA applied to reckless violations, not just knowing violations. Also, offering an initial rate for a new insurance policy could constitute an "increase" as required under 15 U.S.C.S. § 1681a(k)(1)(B)(i) in order for the companies to have taken "adverse action." However, under 15 U.S.C.S. § 1681m(a), consideration of a credit report had to have been a necessary condition for the adverse action, so notice was not required in one case because the applicant received the same rate as would have been offered had his credit score not been taken into account. In the other case, the companies' mistaken belief that § 1681m(a) did not apply to initial applications was not objectively unreasonable and was therefore not reckless. The judgments of the court of appeals were reversed, and the cases were remanded for further proceedings.