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Can an outside investigation constitute a “consumer report” under FCRA? The Seventh Circuit appears skeptical

The Seventh Circuit Court of Appeals, in the case of Rivera v Allstate Ins. Co.,  907 F.3d 1031 (7th Cir. 2018), recently wrestled with a novel question under the FCRA –  whether an investigation conducted by third party into employee misconduct could be considered a consumer report under the FCRA.  Ultimately, the Court did not rule on the issue, but it appeared skeptical that the FCRA would apply.

In Rivera, four portfolio managers at Allstate were terminated after an investigation indicated they were timing their trades to inflate their bonuses at the expense of the portfolios they managed.   Following their termination, the four employees sued Allstate for defamation and violation of the FCRA in District Court.  The FCRA claim alleged that an investigation by a third-party law firm into employee misconduct constituted a “consumer report” as defined by the FCRA, and should have been provided to the employees prior to their termination pursuant to Section 1681. The plaintiffs prevailed, and for their FCRA claims, were awarded statutory and punitive damages totaling $4,000 each as well as attorney’s fees and costs in the amount of $357,716.25.   Allstate appealed.

The Seventh Circuit overturned the FCRA verdict on Spokeo grounds,  but not before expressing great skepticism for the applicability of the FCRA in these circumstances.  It noted that this appeared to be a novel question of law and was an “odd application” of FCRA.  Specifically, the Court questioned whether an investigation could be a “consumer report,” largely because it was conducted by a law firm which did not appear to be a “credit reporting agency.” This issue was not raised by Allstate, though, so FCRAland must wait for the first ruling on this issue.

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About this Author

Sterling Laney, Financial Attorney, Womble Bond Dickinson Law FIrm, Greeneville, South Carolina
Partner

Sterling counsels large financial services clients through heavily regulated financial services and consumer finance sectors. He earned his stripes by being a compass for clients coming out of the 2008 financial crisis and while serving as Vice President, Counsel, and Chief Compliance Officer to Advance American Cash Advance Centers, Inc., the largest provider of non-bank cash advance services in the United States.

Sterling’s previous in-house experience is valuable to clients and as a Partner in Womble Bond Dickinson’s Business Litigation...

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