Eleventh Circuit rules consumers can recover statutory damages for willful FCRA violations without proving actual damages

Joining every other circuit to address the same issue, the U.S. Court of Appeals for the Eleventh Circuit recently ruled that a consumer does not have to prove actual damages to recover statutory damages for willful violations of the Fair Credit Reporting Act.

In Omar Santos, et al. v. Experian Information Solutions, Inc., the named plaintiffs filed a class action lawsuit in which they sought to represent a class of individuals whose credit reports contained tradelines for debts reported to Experian by a collector of medical debts (“Healthcare Tradelines”).  Due to a technical error by Experian, the status dates for the Healthcare Tradelines reported by Experian on the named plaintiffs’ credit reports were inaccurate.  The named plaintiffs were among more than 2.1 million consumers whose Experian credit reports provided to third parties had inaccurate status dates for HealthCare Tradelines.  In their complaint, the named plaintiffs alleged that Experian willfully violated its obligation under the FCRA to “follow reasonable procedures” to ensure that credit reports were prepared with “maximum possible accuracy.”  They sought damages “of not less than $100 and not more than $1,000” for Experian’s willful FCRA violations.

Experian moved for summary judgment.  While it did not dispute that the named plaintiffs’ credit reports contained inaccurate status dates for the Healthcare Tradelines, it argued that the FCRA’s provision for willful violations required the named plaintiffs to prove that they were denied credit, and incurred actual damages, as a result of the inaccurate dates. 

The district court agreed that proof of actual damages was required but denied Experian’s summary judgment motion because there was some evidence that the named plaintiffs suffered actual damages.  After the close of discovery, the named plaintiffs moved to certify a class, and as to the predominance requirement of Federal Rule of Civil Procedure 23, they argued that because they did not have to prove actual damages resulting from Experian’s willful violation, any individual issues concerning class members’ actual damages were irrelevant.  In response, Experian argued that because the putative class members were required to prove they were actually injured by a willful violation, each class member’s individual proof of damages would predominate over common questions.

The magistrate judge agreed with Experian that the named plaintiffs had not met the predominance requirement in Rule 23 based on the district court’s prior ruling on Experian’s summary judgment.  The magistrate judge recommended denying the named plaintiffs’ class certification motion and the district court adopted the magistrate judge’s recommendation and denied class certification.  The Eleventh Circuit then granted permission to the named plaintiffs to appeal the district court’s class certification order.

Relying on the U.S. Supreme Court’s 2021 decision in TransUnion LLC v. Ramirez, the Eleventh Circuit first found that the named plaintiffs had Article III standing to bring the action.  Specifically, the Eleventh Circuit referenced the Supreme Court’s acknowledgment in Ramirez that intangible harms can be concrete if they bear “a close relationship to harms traditionally recognized as providing a basis for lawsuits in American courts.”  According to the Eleventh Circuit,  because violations of the FCRA “have a close relationship to the harm caused by the publication of defamatory information,” a consumer does not have to prove that the false reporting caused an injury because the false reporting itself is the injury.  The Eleventh Circuit found that the named plaintiffs had standing because the record contained evidence that the status dates reported by Experian on their credit reports were inaccurate.

The FCRA, in 15 U.S.C. Sec. 1681n(a)(1)(A), allows a consumer to recover “[1] any actual damages sustained by the consumer as a result of the [violation] or [2] damages of not less than $100 and not more than $1,000.” (emphasis added).  Experian argued that Congress made recovery under both options contingent on a showing actual damages, and that “damages” under the second option are reserved for consumers who incur actual damages but either cannot prove the precise amount of damages or suffered less than $100 in actual damages.  

In rejecting Experian’s argument, one of the key rationales offered by the Eleventh Circuit was the plain language of Section 1681n(a)(1)(A) with regard to the first option, which states that actual damages must be sustained by the consumer as a result of the violation before the consumer can recover.  In contrast, the second option contains none of these requirements.  In addition, emphasizing that the two options in Section 1681n(a)(1)(A) are separated by “or,” the Eleventh Circuit observed that Congress’s use of “or” to separate two provisions in a statute signals that there are two alternatives and that reading the second option to allow for statutory damages without proof of actual damages gives the options separate meanings.

The Eleventh Circuit observed that its reading of the FCRA was consistent with its FCRA case law and with how other circuits have read Section 1681n(a)(a)(A).  The Eleventh Circuit cited to decisions of the Eighth, Seventh, Ninth, and Tenth Circuit which held that the second option of Section 1681n(a)(1)(A) does not require proof of actual damages.  Accordingly, the Eleventh Circuit found that the district court’s denial of the named plaintiffs’ motion for class certification was an abuse of discretion because the district court’ analysis of the Rule 23 predominance requirement was based on its interpretation of the second option in Section 1681n(a)(1)(A).  The Eleventh Circuit vacated the district court’s decision and remanded the case to allow the district court to address Experian’s argument that the named plaintiffs did not meet all of the other Rule 23 class certification requirements.