Photo of H. Scott Kelly

Scott specializes in complex litigation and business disputes.

On November 15, Senators Marco Rubio (R-Fla.) and John Kennedy (R-La.) announced the Small Business Credit Protection Act – proposed legislation that would require consumer reporting agencies to inform small businesses of a nonpublic personal data breach within 30 days of the breach. If passed, the SBCPA also would prohibit credit bureaus from charging small businesses for a credit report within 180 days following a breach.

A one-page summary of the bill is available here.

Unlike “consumer” credit reports, business credit reports are not free and generally cost between $40 and $100 to view a single report from one of the three credit reporting agencies.

“The federal government must uphold the trust Americans need to fully participate in our economy. By ensuring that small businesses receive the protections they need in cases of a security breach, the Small Business Credit Protection Act will do just that,” Rubio said. “I urge my colleagues to join me in passing this bill so that we can continue to protect America’s small businesses – the cornerstone of our economy.”

At this juncture, the proposed SBCPA is only one page, as it appears Senators Kennedy and Rubio are looking for early support for their initiative. The Senate is expected to release a formal draft of the proposed legislation in the coming months.

Troutman Sanders will continue to monitor developments involving the SBCPA and provide any further updates as they are available.

On October 18, the U.S. District Court for the Western District of Washington granted a motion to compel arbitration filed by student loan servicer Navient Solutions, LLC because the arbitration provision in the promissory note signed by the plaintiff was broad enough to capture future credit reporting disputes.  The case is Howard v. Navient Solutions, LLC, 2018 U.S. Dist. LEXIS 180022 (W.D. Wash., Oct. 18, 2018).  A copy of the decision can be found here.

The plaintiff, Adrienne Howard, asserted claims under the Fair Credit Reporting Act for inaccurate credit reporting based on Navient’s alleged failure to update her reduced loan balance to the credit reporting agencies, resulting in delinquencies appearing on her credit report.  Howard had previously filed for bankruptcy and contested the non-dischargeability of her student loans, then settled with Navient after agreeing to a reduced loan balance.

Navient filed a motion to compel based on the arbitration provisions in promissory notes signed by Howard which provided for arbitration as to any claim that “ar[ose] from or relate[d] in any way to the Note.”  Howard opposed Navient’s motion, claiming that the arbitration provisions in her notes were not broad enough to encompass her claim. She argued that her claim did not arise from Navient’s failure to comply with its duties under her notes, but instead stemmed from its alleged failure to investigate and correct the credit reporting of her student loans after her dispute.

According to Judge Settle, the language in the promissory notes was sufficient to compel arbitration because Navient’s “reporting or investigatory actions on the loans [we]re inherently related to the underlying promissory Notes.” The court also found the arbitration provision was not unconscionable since (1) Howard had the option of opting out at the time of execution, (2) the clause provided a mutual right of appeal, and (3) the class action waiver in the clause was valid under governing law.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On September 10, the Court of Appeals for the Third Circuit in Long v. Southeastern Pennsylvania Transportation Authority ruled that a group of plaintiffs lacked standing to assert claims brought under the Fair Credit Reporting Act relating to the defendant’s failure to provide statutorily-required information about their basic FCRA rights. The plaintiffs in Long alleged that SEPTA violated the FCRA’s pre-adverse action notice provision by terminating their employment without first providing them with (i) a copy of their background reports, and (ii) information about their rights under the FCRA.

Relying on the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins, the Third Circuit held that the plaintiffs had standing for the first alleged violation because they had a right to see the background reports before any adverse action was taken against them, despite not alleging any actual inaccuracies in their reports.

However, the court ruled that the plaintiffs lacked standing for the second alleged violation –their failure to receive information about their basic FCRA rights – which the court deemed a “bare procedural violation, divorced from any concrete harm.”  In so ruling, the Third Circuit noted that the plaintiffs were able to learn about their rights under the FCRA and were able to file their lawsuit within the FCRA’s two-year statute of limitations regardless of any disclosure failure on SEPTA’s part.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On October 1, the State of Michigan will join more than 150 cities and counties as well as over 32 states in enacting a ban-the-box policy that prohibits asking job applicants if they have been convicted of a felony in an initial application. The policy applies to Michigan state positions and public employees, not private employers. The question will remain on applications where state law does not allow former felons from being licensed, such as in the healthcare field.

Michigan Governor Rick Snyder is encouraging private employers to follow suit.  Currently, eleven states require the removal of criminal history questions from job applications for private employers.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On August 16, seven Democrat senators proposed a bill (S.3351, named the “Medical Debt Relief Act of 2018”) to amend the Fair Credit Reporting Act and Fair Debt Collection Practices Act to cover certain provisions related to the collection of medical-related debt. The proposed act would institute a 180-day waiting period under the FCRA before medical debt could be reported on a person’s credit report. Further, medical debt that has been settled or paid off would be required to be removed from a person’s credit report within 45 days of payment or settlement.

The bill has been referred to the Senate Banking Committee for consideration. The senators introducing the bill were Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Dianne Feinstein (D-Calif.), Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.), Bob Menendez (D-N.J.), and Maggie Hassan (D-N.H.).

The bill targeted Section 1692(g) of the FDCPA specifically and would require debt collectors to send a statement to individuals that includes a notification that:

(1) the debt may not be reported to a credit bureau for 180 days from the date in which the statement is sent, and

(2) if the debt is settled or paid by the individual or an insurance agency during the 180-day period, the debt may not be reported to a consumer reporting agency.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On August 3, the U.S. District Court for the District of Columbia dismissed a putative class action brought under the Fair and Accurate Credit Transactions Act for lack of subject matter jurisdiction and Article III standing, relying on the 2016 U.S. Supreme Court ruling in Spokeo Inc. v. Robins. As is commonplace in FACTA litigation, the class complaint alleged that the defendant had printed the plaintiff’s entire 16-digit credit card number and expiration date on receipts.

U.S. District Judge Colleen Kollar-Kotelly ruled that plaintiff Doris Jeffries lacked standing to bring her FACTA suit since the few facts alleged in her case failed to show she suffered an injury in fact that is fairly traceable to the defendants’ challenged conduct and that could likely be redressed by a favorable judicial decision. The court also rejected Jeffries’ argument that she was at an increased risk of identity theft when the defendants handed her the receipt with her information printed on it.

In relevant part, the court held:

The receipt containing prohibited information allegedly was provided to plaintiff, and she does not allege any further disclosure of that receipt to anyone else. …  Nor does plaintiff cite any history to support any notion that additional inconvenience associated with review and disposal of an infringing receipt rises to the level of a concrete harm.

The case is Jeffries v. Volume Services America, Inc. et al., Civil Action No. 1:17-cv-01788, in the U.S. District Court for the District of Columbia.  A copy of the memorandum opinion and order can be found here.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On July 17, the Missouri Court of Appeals affirmed a ruling of the Cole County Circuit Court dismissing a putative class action under the Fair Credit Reporting Act against multinational staffing company, Kelly Services, Inc.

A three-judge panel of the Missouri Court of Appeals issued a one-page order and eleven-page memorandum opinion upholding the lower court’s ruling that the plaintiff lacked standing to pursue his claim since he alleged only bare procedural violations without the requisite concrete injury.

The panel held: “Not even the most liberal construction of his pleading would support a construction favorable to finding that Mr. Boergert pleaded a concrete and actual injury. …  Because Mr. Boergert did not plead an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical, the trial court did not err in dismissing his complaint for lack of standing.”

Plaintiff Cott Boergert claimed Kelly Services violated the FCRA when it fired him from a job placement based on information in his consumer report indicating that he had been on probation in 2009 for commission of a felony. Boergert had previously indicated that he had not been on probation for a felony in the preceding seven years when he filled out the employment application.

He then filed the class action in Cole County Circuit Court, claiming that Kelly Services violated the FCRA by including more information in its disclosure form than was allowed and by not providing him with either the report or a summary of his rights. Interestingly, the case was removed to federal court but was dismissed in 2016 under the U.S. Supreme Court’s Spokeo v. Robins decision. That federal district court, however, rethought its decision and the case was remanded back to state court.

The panel’s ruling added: “While alleging that Kelly Services knowingly violated the FCRA by using a disclosure form that contained extraneous information – a bare procedural violation – and that he was therefore entitled to statutory damages for these violations, Mr. Boergert did not plead any concrete or actual injury. … Although he testified during a deposition that the form confused him, he did not plead that it did so or that he did not see the disclosure or authorize Kelly Services to obtain a consumer report.”

Troutman Sanders will continue to monitor these developments and provide further updates as they are available.

On July 5, the U.S. District Court for the Northern District of Illinois granted summary judgment in favor of the Federal Trade Commission against Credit Bureau Service, LLC f/k/a/ MyScore LLC (“CBS LLC”) and its owner, Michael Brown, on charges that they deceived consumers with fake rental property ads and deceptive promises of “free” credit reports, and then improperly enrolled consumers in an expensive monthly credit monitoring service. Judgment was entered in the FTC’s favor for $5.2 million.  A copy of the summary judgment order can be found here.

The FTC’s complaint alleged that CBS LLC and Brown posted Craigslist ads for non-existent rental properties, then impersonated property owners and offered property tours if the consumers would agree to obtain credit reports and/or scores from their websites. The complaint also alleged that the defendants claimed they were providing free credit reports and scores when, in actuality, their systems would automatically enroll consumers in $29.94 per month credit monitoring services without consumers’ knowledge.

The summary judgment order found that CBS LLC and Brown violated the FTC Act, the Restore Online Shoppers’ Confidence Act, the Fair Credit Reporting Act, and the Free Annual File Disclosures Rule. It also:

  • Entered a permanent injunction that bans the defendants from selling any credit monitoring service with a negative option feature and from misrepresenting material facts about any product or service;
  • Instructs the defendants how they must monitor their affiliate marketers in the future;
  • Requires the defendants to investigate any complaints about affiliate marketers and end the affiliation if they find practices the order prohibits;
  • Mandates that the defendants make specific disclosures when selling any product or service with a negative option feature and when offering free credit reports; and
  • Bars the defendants from using billing information to obtain payments from consumers without first obtaining their express informed consent.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On June 11, St. Louis County officials signed an executive order, effective immediately, that would “ban the box” and ensure that St. Louis County will no longer ask job applicants for criminal histories in their initial employment applications.  Other jurisdictions in Missouri with ban-the-box laws include Jackson County, Columbia, and Kansas City.

“A parolee’s failure to find full-time employment becomes, quite frankly, a serious public safety issue for every county resident,” St. Louis County Executive Steve Stenger told the St. Louis Post-Dispatch. “Without a decent job, ex-prisoners are far more likely to struggle with substance abuse. And they are far more likely to engage in criminal activity.”

The executive order provides that “employment decisions will not be based on the criminal history of a job applicant unless demonstrably job-related and consistent with business necessity, or unless state or federal law prohibits hiring an applicant with certain convictions for a particular position.”

Currently, more than 150 cities and counties nationwide as well as 32 states have passed ban-the-box legislation that delays questions about criminal records of job applicants until later in the hiring process. Eleven of those states have required the removal of criminal history questions from job applications for private employers.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On June 7, the Federal Trade Commission issued a public notice regarding the Economic Growth, Regulatory Relief, and Consumer Protection Act, which goes into effect on September 21, 2018.  The new law mandates that the three major credit reporting agencies set up webpages to allow consumers to request one-year fraud alerts and credit freezes.  The FTC will post links to those webpages on IdentityTheft.gov.

The law requires any credit freeze to be free of charge – nationwide.  Currently, some credit freezes may involve fees under state law.  The new law also allows consumers to freeze a child’s credit file until the child is 16 years of age.

Further, consumers will be allowed to request one-year fraud alerts, which are currently set at 90 days. An initial fraud alert will still be free, and identity theft victims can still get an extended fraud alert for seven years. For military servicemembers, the new law provides more.  Within a year, credit reporting agencies must offer free electronic credit monitoring to all active duty military.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.