Supreme Court Considers Whether Consumers Can Sue The Federal Government for Credit Reporting Violations

November 6, 2023

Earlier today, the U.S. Supreme Court heard argument in USDA Rural Development Rural Housing Service v. Kirtz, a case that will decide whether the federal government can claim sovereign immunity as a defense against lawsuits brought under the Fair Credit Reporting Act. The Berkeley Center for Consumer Law and Economic Justice, along with the National Consumer Law Center, Public Justice, and the Housing Clinic of the Jerome N. Frank Legal Services Organization at Yale Law School, filed an amicus brief against sovereign immunity. 

The Fair Credit Reporting Act (FCRA) imposes numerous requirements on businesses and other entities that use consumer credit information or provide that information to credit reporting agencies like Transunion, Equifax, and Experian. Because of the sensitivity of information on credit reports, which is critical for consumers to take out a loan, buy a home, or apply for a job or rental housing, FCRA places many safeguards on handling credit reporting data. In this case, plaintiff Reginald Kirtz filed suit against the U.S. Department of Agriculture (USDA) alleging that the federal agency violated FCRA by failing to investigate and correct inaccurate information it provided to TransUnion regarding a rural housing loan and student loan he received and eventually paid off. USDA sought dismissal of the suit, arguing that when Congress enacted FCRA, it did not explicitly waive federal sovereign immunity, which bars private cases for damages against the government. The district court agreed with the USDA, but the Third Circuit Court of Appeals reversed, holding that FCRA’s language indicated that Congress had in fact intended federal sovereign immunity to be waived. The U.S. Supreme Court granted certiorari to resolve a circuit split on this question. 

At issue before the Court is whether Congress, when it enacted FCRA, clearly and unambiguously intended to waive sovereign immunity and authorize private FCRA lawsuits against the government. FCRA provides that any “person” that uses credit information or furnishes consumer information to credit reporting agencies must correct inaccurate information and investigate consumer complaints. Individual consumers can file private damages suits to challenge wilful or negligent violations of the Act by any “person.” The text of FCRA defines “person” to include a “government or governmental subdivision or agency.” Kirtz argues that in so defining “person,” FCRA unequivocally waived federal sovereign immunity. The government disagrees, contending that in order for immunity to be waived, FCRA’s liability provisions must have expressly included the United States. The government also argues that authorizing private damages suits under FCRA would create a significant burden on the publis fisc.

The Center's amicus brief underscores that FCRA’s express purposes can only be served if the Act’s private enforcement provisions apply to all furnishers and users of credit data, including the federal government. From purchasing homes to obtaining security clearances, credit history is an integral part of people’s lives. FCRA’s private right of action to enforce its provisions is a critical mechanism permitting borrowers to hold users and furnishers of critical consumer information, including the federal government, accountable.

The brief describes the myriad ways in which the government, as the nation’s largest lender and employer, routinely handles consumer information. For example, the Small Business Administration administers a variety of direct loans and loan guarantees to small entrepreneurs. The Department of Veterans Affairs provides direct loans to veterans seeking mortgage loans. Both of these agencies use and provide consumer credit information. And when attempting to collect on debts, all federal agencies are authorized to provide information about the debtor to credit reporting agencies. Harms from reporting incorrect consumer information are exacerbated in markets where the federal government plays an exclusive or dominant role. For example, after natural disasters, the government may be the sole provider of credit because private lenders do not have the financial incentive to extend credit. In all of these scenarios, if the lender were a private entity, consumers would be able to seek a remedy for any harm resulting from mishandling their credit information. When it plays such a key role in consumer credit markets too, the federal government cannot escape liability.

We expect a decision in the spring.