Seeking Damages for Background Check or Credit Reporting Errors
A Florida attorney can help you secure punitive awards against consumer reporting agencies
on March 29, 2018
Updated on January 12, 2023
Consumer reporting agencies (CRAs) often make errors with the consumer information they maintain and share with users. If the CRA is to blame for the errors, it may be liable for damages. There are two measures of unlawful conduct for CRAs: a negligent failure, and worse, a willful failure to comply with the Fair Credit Reporting Act (FCRA).
Punitive Damages Are Awarded To Punish, and Deter Future Conduct
Under a negligent failure, a CRA is liable to a consumer for the consumer’s actual damages. But “willful” noncompliance will subject the agency to punitive damages. Under the FCRA, punitive damages are intended to deter conduct and punish the bad actor in hopes of preventing that conduct in the future.
Barry Balmuth has practiced law in Florida for 28 years, and has handled an increasing amount of FCRA claims over the previous decade. He says awards of punitive damages against CRAs are uncommon, but business decisions that favor cutting costs over ensuring accuracy lead to CRAs putting themselves at risk.
“A lot of these companies do it on the cheap, and every now and then they have to pay an award,” Balmuth says. “But it’s cheaper sometimes for them to do that than do it right in the first place. That is the idea of punitive damages: send a message to hopefully incentivize them to correct what they’re doing wrong so they don’t repeat it.”
Much of Balmuth’s FCRA work comes from “mixed file” cases—wherein information from two different persons gets mixed into a consumer file. That was the case for a recent client, Richard Williams, who had information from another “Ricky” Williams mixed into his file. Ricky had a criminal record; Richard did not. But Ricky’s criminal records showed up in the client’s background check for a job offer. The client corrected the information, but not until after the employer filled the job with someone else. Several months later, the same error occurred again, and again the employer moved on and hired someone else. Understandably, Richard Williams was upset. He sued the background check company, First Advantage Screening, for willful violations of the FCRA.
Where Did the Background Report Company Fail?
There were some clear differences between the two Williams: Ricky was listed four inches taller and at an address 300 miles from Richard’s. First Advantage “obtained a license to get address histories, but the license they obtained did not cover all of their employees that prepared the report,” says Balmuh. “Clearly, that was to save money. I don’t think it was a coincidence that both times they did not obtain an address history.”
Balmuth claims if the company had run the address history, they would have known these were two different people—something admitted by First Advantage’s representative at trial.
How Did the Court Determine the Amount of Punitive Damages?
Balmuth submitted a punitive damage range between $1.08 million and $3.3 million. The $3.3 million represented 1 percent of the most recent sale price for the company, which was $336 million. The jury awarded the client the highest amount requested, $3.3 million, in addition to $250,000 in actual damages.
This was not a rare mistake for First Advantage. The court found that “First Advantage made a business decision to shift the burden to more than 14,000 innocent consumers to ensure the quick turnaround and low price that earned it a large market share.”
In finding for William’s punitive damage claim, the court and jury feared that “First Advantage will continue shifting that burden—and, by extension, strip thousands of qualified low-wage, hourly employees of job opportunities—so long as it makes good business sense to do so.”
Williams’ verdict signals that a jury may go award an even higher amount in the future when faced with a similar situation. For consumers who experience errors in their background or credit reports, they should contact an experienced Florida consumer attorney to determine if they are entitled to damages.