Is the Government a Person?

Can the government be held liable for issues related to fair credit reporting?

Fair Credit Reporting Supreme Court Preview

Dep’t of Agric. Rural Dev. Rural Hous. Serv. v. Kirtz., No. 22-846,

46 F.4th 159 (3d Cir. 2022),

cert. granted, 2023 WL 4065594 (June 20, 2023).

Oral argument scheduled for Nov. 6, 2023.

Issue: Whether the civil liability provisions of the Fair Credit Reporting Act unequivocally and unambiguously waive the sovereign immunity of the United States.

Like many people in the U.S., Reginald Kirtz took out both student and housing loans. See Kirtz v. Trans Union LLC, 46 F.4th 159, 162–63 (3d Cir. 2022). In 2018, he paid off both of those loans and his accounts were closed with a balance of zero. Id. at 163. Nonetheless, the Pennsylvania Higher Education Assistance Agency (“AES”) and the U.S. Department of Agriculture’s Rural Housing Service (“USDA”) continued to report the status of his accounts as overdue. Id. According to Kirtz, this damaged his credit report with Trans Union LLC (“Trans Union”) and, in turn, lowered his credit score. Id. Kirtz disputed the accuracy of the overdue reports in a letter to Trans Union. Id. Trans Union then notified both AES and the USDA of the disputed information. Id. Kirtz sued Trans Union, AES, and the USDA, alleging that neither AES nor the USDA investigated or corrected the disputed information as required by the Fair Credit Reporting Act (“FCRA”). Id.

The FCRA was enacted to “ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” Id. at 162 (3d Cir. 2022) (citing Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007)). In 1996, Congress amended the FCRA, expanding its reach to authorize suits against “any person” who fails to comply with “any requirement” under the FCRA. Id. While it is unquestionable that the FCRA requires that disputed information provided to a credit reporting agency be investigated and corrected, the question before the Court is whether Congress intended, when making the amendment, to include the government in the term “any person.” See 46 F.4th at 163.

The FCRA defines the term “person” to include “any individual, . . . government or governmental subdivision or agency.” 15 U.S.C. § 1681(b). Nonetheless, the USDA filed a motion to dismiss claiming they are immune from liability and thus should not count as a person, as defined under the FCRA. 46 F.4th at 163. The doctrine of sovereign immunity means that the United States government cannot be sued unless Congress has chosen to waive the immunity. U.S. v. Mitchell, 463 U.S. 206, 212 (1983). The district court granted the USDA’s motion to dismiss, finding that it would be “implausible” for the federal government to be sued under the FCRA. 46 F.4th at 162. Kirtz appealed this decision to the Third Circuit. Id.

Ruling in Kirtz’s favor, the Third Circuit held that the plain language of Sections 1681n and 1681o of the FCRA unequivocally waived the sovereign immunity of the United States. Id. at 166. The court applied principles of statutory interpretation and explained that Congress does not need to use any “magic words” to waive immunity. Id. at 164. Moreover, because the federal government is “the nation’s largest employer and creditor,” allowing lawsuits against it for violations of the FCRA would be consistent with Congress’s goal of ensuring “fair and accurate credit reporting.” Id. at 174.

Despite the clear language in the statute, there is a circuit split on whether the 1996 amendment exposes the government to civil liability under the FCRA. See 46 F.4th at 163–64. The Fourth and Ninth Circuits hold no, whereas the District of Columbia, Seventh, and now the Third hold yes. Id. This case will allow the Supreme Court to determine once and for all whether consumers can sue the federal government under the FCRA.

WHAT’S AT STAKE

When people take out a loan, they expect that they will be viewed as debt-free upon successfully paying off their obligation. If, instead, by no fault of their own, their credit reports reflect incorrect assertions that they have failed to pay their debts, they should have recourse against the responsible entity. This includes when that entity is the government, one of the largest creditors in the nation. Credit reports are not only relied on for lending decisions, but they are also increasingly used for tenant and employee screening. In 2020, complaints to the CFPB about credit reporting issues rose 129%, and although there is a process for disputing an error on your credit report, it can be difficult for many consumers to navigate. Older adults living with low income who have limited internet access or who suffer from cognitive disabilities face disproportionate challenges in this regard. If the Supreme Court holds that the government is immune from suit under the FCRA, it will undercut the purpose of the statute and make an already complex process more challenging.

Meryl Grenadier

mgrenadier@aarp.org

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