As reported in a new customer alert from Hunton Andrews Kurth, Mitigating FCRA Risks in the COVID-19 World (October 23, 2020), consumer disputes under the Fair Credit Reporting Act (FCRA) doubled in the years leading up to the COVID-19 pandemic . Following a slight reduction in FCRA notifications due to court closures and other COVID-19 restrictions, claims are likely to resume their previous upward trajectory. In fact, the Consumer Financial Protection Bureau (CFPB) has already seen an increase in consumer complaints, many of which mention COVID-19-specific keywords.
Given the expected increase in FCRA complaints, the warning highlights the need for financial institutions and financial service companies to develop FCRA-compliant policies and procedures, including training on these policies and procedures, to mitigate the risk of FCRA-related enforcement actions and disputes; especially in light of the regulatory changes associated with the COVID-1
Policies may provide coverage for legal fees and costs for responding to regulatory requirements, including issuing summonses requiring testimony or presentation of documents. See Astellas US Holding, Inc. v. Starr Indem. & Liab. Co. No. 17 CV 8220, 2018 WL 2431969, at * 1 (ND Ill. 30 May 2018) (treats lawsuit as a "statement" because it is a "written request for … non-monetary relief"); Syracuse Univ. V. Nat & # 39; l Union Fire Ins. Co. of Pittsburgh, PA 40 Other. 3d 1205 (A) (NY Sup. Ct. 2013) (finding large jury investigations and lawsuits constituted a "claim" under D&O policy), aff & # 39; d 112 AD3d 1379 (NY App. Div. 2013). Even if the supervisory authorities' investigative efforts do not lead to fines or penalties, the costs of defending themselves against lawsuits or enforcement measures can be significant and can be covered by insurance.
Insurance can also provide coverage for FCRA-related damages. Because a successful FCRA dispute can reclaim actual damages or statutory penalties for each violation, attorney's fees, costs, and punitive damages, a company involved in an FCRA dispute can quickly be held liable for a substantial award, especially in class actions. While some insurances may exclude certain exemption components (such as punitive damages), coverage may remain for statutory penalties, which some courts have treated as compensatory, not punitive. See e.g. Navigators Ins. Co. v. Sterling Infosystems, Inc. No. 653024/2013, 2015 WL 4540389, at. 4–5 (NY Sup. Ct. 28 July 2015) (holding FCRA damages was "compensatory" in nature and therefore not excluded as "penalties" under the E&O policy); see also Bateman v. Am. Multi-Cinema, Inc ., 623 F.3d 708, 718 (9 Cir. 2010) (possession of FCRA statutory tort law is not a criminal offense). Ashby v. Farmers Ins. Co. of Or. 592 F. Supp. 2d 1307, 1316-17 (D. Ore. 2008) (treat statutory penalties "as" compensatory "damages"). Of course, the coverage area is always fact-specific and depends on the policy language and facts in each claim. Prospective and renewable policyholders should carefully examine the extent of coverage available, including the effects of any exemptions or carvings from the definition of "loss", in the light of the damages available under the FCRA.
Due to the expected reopening of FCRA claims applications, consumer credit information providers should be cautious about the future and anxious to establish comprehensive FCRA compliant policies and procedures. In addition to a robust compliance program, D&O, E&O and other insurances can provide vital protection and confidence for an otherwise uncertain future.