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September 03, 2009

Class action against check verifiers reinstated

"The 6th Circuit revived a class action accusing foreign check-verification companies of ignoring a numbering change in Tennessee's driver's license system, making it appear as if 'hundreds of thousands, if not millions' of consumers were first-time check writers.

Cheryl Beaudry filed the class action in 2007 against TeleCheck Services, TeleCheck International and First Data Corp., alleging violations of the Fair Credit Reporting Act (FCRA).

U.S. District Judge Aleta Arthur Trauger dismissed the case, saying Beaudry failed to allege injury - namely, that she had a check rejected or transaction canceled because of the error.

But the Cincinnati-based appellate panel said she didn't need to prove actual injury under the law.

'FCRA's private right of action does not require proof of actual damages as a prerequisite to the recovery of statutory damages for willful violations of the Act,' Judge Sutton wrote.

'The district court and the defendants suggest that, if we read the law to allow statutory damages without proof of injury, we would be creating a strict liability regime,' Sutton added. 'Not so. The existence of a willfulness requirement proves that there is nothing 'strict' about the state of behavior required to violate the law' (emphasis in original).

Sutton said Beaudry simply had to show that the defendants used unreasonable procedures in preparing her credit report.

'Under these circumstances,' the court concluded, 'Beaudry's claim should not have been dismissed.'"
The reason that actual injury is not required for a willful violation of the FCRA is because 15 U.S.C. 1681n provides for statutory damages of not less than $100 but not more than $1000.  15 U.S.C. 1681o, on the other hand, does not allow the recovery of statutory damages for a negligent violation of the FCRA.  Thus, a negligent violation must cause actual damage to the consumer for the consumer to be able to recover.

Eventually, I will get around to explaining 1681n and o in detail but, currently, I am bogged down with work and, as a result, stuck at 1681d.  But I'll get there, I promise.

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