The Eleventh Circuit vacated a $490,000 punitive damages award last Friday for a single FCRA violation, finding that there wasn’t enough proof of a willful violation. Considering that the jury had initially awarded $3 million in punitives (which the trial court cut to $490,000 on due process grounds), this is a big win for Experian. But, it wasn’t a total victory. The court upheld a “relatively modest” $5,000 compensatory damages award for the plaintiff’s physical pain and mental suffering, even though there were no economic losses.
The case—Younger v. Experian Info. Sols., Inc., 2020 U.S. App. LEXIS 19170 (11th Cir. June 19, 2020)—involved credit card debt owned by a debt buyer, Portfolio Recovery Associates LLC (PRA). Before the case against Experian was filed, PRA sued Younger in small claims court over the debt. After that case was dismissed, Younger sent Experian a letter, asking it to remove the debt from his credit report.
For some unknown reason, Experian flagged the letter under the company’s suspicious mail policy, and did not open an investigation. Instead, per this policy, it sent a standard response letter asking Younger to call Experian if he thought anything on his report was inaccurate. Rather than calling Experian back about the debt, though, Younger sued Experian (as well as PRA and another CRA), who entered into settlements totaling $76,500 before trial) for claimed FCRA violations.
The relevant FCRA provisions require that consumer reporting agencies (CRAs) and furnishers reinvestigate disputes within 30 days after receiving a consumer’s dispute. CRAs must promptly notify the furnisher of any disputed info and “promptly” delete or modify anything that’s inaccurate. And, when they make changes based on reinvestigation, the CRA has to send the consumer the details and a copy of the full consumer report. Under the FCRA, CRAs have to maintain “reasonable procedures designed . . . to limit the furnishing of consumer reports” to permissible purposes, and Experian hung its hat on that requirement here
The plaintiff claimed that Experian “negligently and willfully” violated the FCRA by failing to reinvestigate the PRA credit after. The magistrate judge found as a matter of law that the failure to investigate was negligent. The jury awarded $5,000 in compensatory damages for the plaintiff’s pain and suffering based on his testimony that Experian’s letter and refusal to acknowledge his complaint stressed him out, caused him to lose sleep, and exacerbated a preexisting nerve injury and caused him pain. The Eleventh Circuit upheld this award based on the plaintiff’s testimony, despite noting that the claimed injuries were “impalpable.”
The jury also slapped the company with a huge punitive damages award (which the trial court reduced), but the Eleventh Circuit vacated that award completely, finding that there wasn’t enough evidence that Experian acted willfully. The plaintiff argued that Experian had recklessly disregarded the reinvestigation duty, and that its suspicious mail policy was designed to increase revenue by inducing the consumer to call Experian so that Experian could market its products during the phone call. Experian, on the other hand, claimed that that the policy was an anti-fraud measure, designed to sort out claims that did not appear to come directly from consumers and ensure that Experian did not send out any consumer reports for impermissible purposes. Because the policy “had a foundation in the statutory text,” the Eleventh Circuit held the violation wasn’t willful as a matter of law.
Despite the lack of punitives in the end, this case should remind CRAs and furnishers to take a look at their dispute intake procedures. The failure to investigate was ruled to be negligent as a matter of law here, and the plaintiff was able to get compensatory damages based on his claimed pain and suffering. To avoid liability, companies should ensure they’re promptly reinvestigating any consumer disputes, that all relevant info the consumer submits is reviewed and considered as part of this reinvestigation, and—at a bare minimum—that their policies are rooted in statutory text.