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Credit Reporting Agencies’ CEOs Not Liable in FCRA Case; Court Grants Motion to Dismiss

The consumer in this FCRA case did not allege valid claims against the CRAs and their CEOs when they reportedly did not remove an incorrect account from her credit file.

07/27/2022 9:00 A.M.

3 minute read

A consumer’s Fair Credit Reporting Act claims against the three credit reporting agencies (CRAs) and their CEOs fell flat after Judge Susan M. Brnovich in the U.S. District Court for the District of Arizona found the plaintiff failed to properly serve the defendants under the FCRA and that her claims were invalid.

According to the court’s decision, the plaintiff’s First Amended Complaint (FAC) brought claims against the three major credit reporting agencies—Equifax, Experian, and TransUnion (the CRAs)—and their respective CEOs, alleging that the defendants violated the Fair Credit Reporting Act (FCRA), 15 U.S.C. [Section] 1681, et seq. Specifically, the FAC alleges that the CRAs failed to respond to communications or remove an errant account from the plaintiff’s credit report.

The plaintiff stated in the FAC that in April 2021, she contacted the CEOs of the three CRAs to dispute an incorrect account on her credit report and that the allegedly incorrect account was not removed.

The CRAs, however, said they correctly reported the account on the plaintiff’s credit report, according to the case report.

The plaintiff responded with a “claim against each of the CRAs and their respective CEOs for violation of the FCRA, alleging that the CRAs[’] willful refusal to delete or remove an unverified account and willful ignorance of the plaintiff’s notice and dispute to remove an errant account violate[d] the FCRA’s reasonable procedures section.”

Ultimately, while the plaintiff had a copy of the summons and complaint delivered to the corporate office where each CEO worked, the court said “this is not sufficient for serving an individual defendant within the United States. Furthermore, while the statutory agents served were authorized to accept service of process on behalf [of] the corporations, there is no proof that they were authorized to accept service on behalf of the individual CEOs. Thus, the CEO [d]efendants were not properly served in their individual capacities.”

This left the court without jurisdiction over the complaint against the defendants in this case. Additionally, the CEOs are not recognized as CRAs under the FCRA, rather officers of the CRAs, and the plaintiff’s complaint did not contain allegations that would stand to show the CEOs individually acted to cause the alleged FCRA violations.

“Instead, the allegations merely conflate the CEOs with the CRAs themselves. This is insufficient for the [c]ourt to find liability on behalf the CEO [d]efendants individually. Additionally, no allegations in the FAC allege that CEOs were the ‘guiding spirits’ behind the conduct that allegedly caused the FCRA violations,” the court said.

The court dismissed the plaintiff’s FAC and granted the defendants’ motion to dismiss.

ACA’s Take:

The court’s conclusion is in accordance with other decisions that have examined the issue and the plaintiff did not allege sufficient facts to hold the CEO defendants liable under the FCRA. The court’s decision provides helpful guidance to agency executives, stating, “the allegations in the FAC do not allege that the CEOs took actions individually which led to the CRA violations. Instead, the allegations merely conflate the CEOs with the CRAs themselves. This is insufficient for the court to find liability on behalf the CEO defendants individually.”

Legal counsel can provide additional information to agencies that wish to review their policies to ensure the agency structure affords sufficient protection to executives acting on behalf of the agency.

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