In a unanimous slip opinion, the US Supreme Court ruled on Thursday that the Fair Credit Reporting Act (FCRA) waives sovereign immunity and that the federal government can be liable for incorrect debt reporting that damages credit scores.
Justice Neil Gorsuch authored the opinion of the court. Gorsuch noted that the FCRA allows consumers to sue lenders who willfully or negligently supply false information about them to an entity that creates credit reports. Under the FCRA, consumers can sue a person who willfully or negligently causes damage to their credit, and its definition of person includes “any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.” Gorsuch found that this provision “clearly waives sovereign immunity” for the federal government and that it can be liable under the FCRA.
In an amicus brief to the court, several public interest groups argued for the position that the court eventually took on the issue asserting:
… that the express purpose of FCRA can be served only if the Act’s sections apply to all furnishers, including both private market participants and federal agencies. Congress enacted FCRA out of a recognition that the health of the national economy depends on fair and accurate credit reporting. Credit reports and scores can determine everything from where a person lives to where she works to whether her small business survives. The federal government plays a central role in the distribution and use of this data.
This case arose after Reginald Kirtz sued the US Department of Agriculture (USDA) for alleged violations of the FCRA. Kirtz accused the agency of reporting a loan as”past due,” which damaged his credit score. Kirtz notified his credit reporting agency, Trans Union, of the incorrect reporting of his loan. Trans Union then notified the USDA of the issue, but it did not try to investigate or correct the disputed information. Kirtz relied on the FCRA for his cause of action, which requires an investigation after receiving notice of a dispute over the completeness or accuracy of any information provided to a consumer reporting agency.
The USDA moved to dismiss the case, arguing that the FCRA does not explicitly waive sovereign immunity. The US District Court for the Eastern District of Pennsylvania agreed with the USDA and granted the motion for summary judgment. On appeal, the Third Circuit ruled that the FCRA authorizes suits against the federal government for violations and reversed the dismissal for summary judgment. The USDA then appealed to the Supreme Court.
Under the doctrine of sovereign immunity, the federal government is generally immune from suits by individual citizens unless Congress waives immunity and allows individuals to sue by passing a statute.