On June 1, 2023, the United States District Court for the Eastern District of California granted a Plaintiff’s motion for preliminary approval of a settlement in a class action lawsuit that claimed the Defendant violated the federal Fair Credit Reporting Act (FCRA) that regulates background checks by allegedly providing false information on credit reports to automobile dealerships.
The Plaintiff in the lawsuit claimed that the Defendant – a company that “sells credit reports that help automobile dealers manage regulatory compliance obligations accompanying consumer car purchases” – violated FCRA 15 U.S.C. § 1681e(b) by failing to “follow reasonable procedures to assure maximum possible accuracy” which is required under the federal law.
One of the obligations for automobile dealers derives from a Treasury Department Office of Foreign Assets Control (OFAC) regulation that prohibits dealers from doing business with anyone designated as a “Specially Designated National” or “SDN” on OFAC’s SDN list. SDNs are prohibited from transacting business in the United States for national security reasons.
The Plaintiff was a consumer whose name inaccurately came up as an OFAC Hit matching him with an SDN on a credit report sold by the Defendant to an automobile dealer. After being denied credit to buy a car, the Plaintiff later requested and received a copy of the credit report where he learned that the Defendant’s OFAC check incorrectly matched him with an SDN.
The Plaintiff filed the class action lawsuit on behalf of himself and a class of similarly situated consumers pleading causes of action under the FCRA. Under the proposed settlement agreement, the Defendant “will automatically pay $1,000 to each member of the FCRA Class” and the parties “request approval of an estimated 1,119 individuals” for settlement purposes.
The FCRA is federal legislation enacted by Congress in 1970 to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies (CRAs), and to protect consumers from the willful and/or negligent inclusion of inaccurate information in their consumer reports. To view a copy of the FCRA, click here.
ClearStar is a leading global Human Resources technology company specializing in background checks, drug testing, and occupational health screening. ClearStar offers employers compliance services that include a deep understanding of the FCRA and other laws regulating workforce screening in the United States. To learn more about ClearStar, contact us.
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Thomas Ahearn - Digital Content Editor
Thomas Ahearn is a Digital Content Editor at ClearStar, a leading Human Resources (HR) technology company specializing in background checks, drug testing, and occupational health screening. He writes about a variety of topics in the background screening industry including Artificial Intelligence (AI), "Ban the Box," class action lawsuits, credit reports, criminal records, drug testing, Equal Employment Opportunity Commission (EEOC), Fair Credit Reporting Act (FCRA), Form I-9, identity theft, privacy, social media screening, and workplace violence.
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