Circuit Courts Uphold Substantial Damages Awards for FCRA Violations Against Credit Information Providers

Posted By: Berger Montague August 1, 2017

For credit reporting errors, creditors can be sued under the Fair Credit Reporting Act (“FCRA”) for failing to conduct a reasonable investigation when a consumer disputes reported information to a credit bureau. 15 U.S.C. § 1681s-2(b).

If a consumer makes repeated disputes but the error is not corrected, the consumer could be entitled to substantial damages. In two recent unpublished decisions, the Fourth Circuit and Ninth Circuit upheld substantial damage awards against credit information providers

Daugherty v. Ocwen Loan Servicing, LLC

In Daugherty v. Ocwen Loan Servicing, LLC., No. 16-2243, ___ F. Appx. ___, 2017 WL 3172422 (4th Cir. July 26, 2017), the plaintiff alleged that Ocwen reported his mortgage loan as two separate trade lines, but failed to update one of the trade lines to reflect that his loan was no longer in foreclosure. The plaintiff disputed over 20 times, and Ocwen failed to correct the problem.

The plaintiff sued Ocwen and the credit bureau, but settled with the credit bureau prior to trial. After trial, the jury awarded the plaintiff just over $6,000 in actual damages, but $2.5 million in punitive damages for Ocwen’s willful violation of the FCRA.

On appeal, the Fourth Circuit upheld the finding that Ocwen willfully violated the FCRA and upheld the award of actual damages. The Court noted that under Supreme Court precedent, punitive damages awards that are in excess of a 10:1 ratio to actual damage awards may violate due process.

The Court, however, found that whether a punitive damage award is constitutionally excessive “cannot be reduced to a simple mathematical ratio,” and found that in the plaintiff’s case, an award of $600,000 (or a 100:1 ratio) would the “outermost punitive damages award” that could be sustained. The Court granted the plaintiff the option of accepting the lower award or proceeding to a new trial.

Kim v. BMW Financial Services NA LLC

In Kim v. BMW Financial Services NA LLC, No. 15-56801, ___ F. Appx. ____, 2017 WL 3225710 (9th Cir. July, 31, 2017), the plaintiff alleged that an identity thief had taken out a car loan in the plaintiff’s name. He disputed the reporting of his car loan with the credit bureaus, but BMW refused to stop the derogatory reporting. The plaintiff alleged that he was denied credit multiple times due to the erroneous reporting.

At trial, the jury awarded $250,000 in actual damages against BMW for its FCRA violations and $150,000 and a civil penalty of $30,000 under California’s identity theft law. The Ninth Circuit upheld the award finding that the plaintiff’s testimony regarding his credit denials, and his expert’s testimony regarding lower credit scores, was sufficient to sustain the damages awards.

Conclusion

Daugherty and Kim illustrate that when credit information providers ignore or fail to reasonably investigate credit disputes, a consumer may be entitled to substantial damages and punitive damages. If you have creditors reporting incorrect information on your credit report, the lawyers at Berger Montague may be able to help.