On February 8, the U.S. Supreme Court issued a unanimous decision in Department of Agriculture Rural Development Rural Housing Service (USDA) v. Kirtz, holding that the Fair Credit Reporting Act’s (FCRA) clear statutory text indicates a government agency can be sued for a FCRA violation. The decision resolved a circuit split. The D.C., Third, and Seventh Circuits have allowed FCRA litigation against government agencies, but the Fourth and Ninth Circuits have found governmental immunity prevents such suits.

The case arose from a USDA loan. The individual borrower contended that he repaid his loan in 2018, however, the USDA repeatedly reported his loan as “past due” to a consumer reporting agency (CRA). The borrower argued the alleged inaccuracy damaged his credit score and “threatened his ability to secure future loans at affordable rates.” The borrower notified the CRA of the issue, which notified the USDA, but, according to the defendant, the USDA failed to take any action to correct the reporting. The borrower responded by filing suit under FCRA § 1681n for alleged willful violations and § 1681o for alleged negligent violations. The USDA did not dispute the allegations, but filed a motion to dismiss on the basis that as a governmental agency it is immune from suits for money damages in this context. The district court granted the USDA’s motion, but the Third Circuit reversed, holding that §§ 1681n and 1681o allow for suits against “any person” who violates the FCRA, which includes government agencies. The Supreme Court granted the USDA’s petition for certiorari.

As a general principle, the United States is immune from suits for money damages, but Congress may choose to waive that immunity. Thus, courts will permit suits to proceed against governmental agencies if the statute “unmistakably” allows it. In affirming the Third Circuit, the Supreme Court relied primarily on the statutory text. Section 1681n creates a cause of action for money damages against “any person” who willfully or negligently fails to investigate a consumer complaint and make necessary corrections. Section 1681a defines “person” to include “any … governmental … agency.” The court, therefore, concluded that dismissing suits like the borrower’s “would effectively ‘negat[e]’ suits Congress has clearly authorized.”

For its part, the USDA argued Congress must not only define “person” to include governmental agencies, but also must expressly waive immunity in the statute. In support, the USDA cited Employees of the Department of Public Health & Welfare v. Department of Public Health & Welfare, which found that Congress had not spoken clearly enough when it amended the statute at issue to bring some state agencies within its reach. The Court distinguished Employees by noting that in this case Congress clearly amended FCRA’s liability provision to cover a much larger class of defendants, including government agencies. Ultimately, the Supreme Court found that while “[t]he Executive Branch may question the wisdom of holding federal agencies accountable for their violations of the [FCRA] … Congress’s judgment commands our respect and the law it has adopted speaks clearly: A consumer may sue ‘any’ federal agency for defying the law’s terms.”

Our Take:

This ruling has implications for the consumer reporting ecosystem. Information is supplied to the consumer reporting system on a voluntary basis. If the response by government agencies to new liabilities and compliance responsibilities is to reduce the amount of information they supply to the ecosystem, then the net effect of the ruling would be to degrade the information available to private actors about consumers, which in turn would degrade the quality of decisions made based on consumer reports.