Consumer Finance Insights
October 5, 2015

Unclear FCRA Disclosures Can Be Costly: Whole Foods Settles FCRA Class Action Dispute

Whole Foods Market Group, Inc. (Whole Foods) recently settled a putative class action relating to Fair Credit Reporting Act (FCRA) disclosures that were allegedly deficient.  In Speer v. Whole Foods Market Group, Inc., the plaintiff—a Whole Foods employee—filed suit in the United States District Court for the Middle District of Florida, alleging that Whole Foods did not adequately disclose its intent to run a background check on him in connection with his employment.  See 8:14-cv-03035-RAL-TBM, Dkt. No. 1 (Complaint).

The plaintiff alleged that Whole Foods used third-party consumer reporting contractors to request background checks on its employees, and that the background checks are therefore “consumer reports” within the meaning of the FCRA.  See 15 U.S.C. § 1681a(d)(1).  A “consumer report” can only be used for employment purposes where:  (i) the employer provides a disclosure to the consumer that it will request a copy of the consumer report for employment purposes; (ii) the disclosure is made in a “document that consists solely of the disclosure;” and (iii) the consumer authorizes the employer to procure the consumer report in writing.  Id. at §§ 1681b(b)(2)(A)(i)-(ii).  The disclosure that Whole Foods allegedly provided to the plaintiff consisted of a form that both stated Whole Food’s intention to perform a background check, and contained a release of liability related to the background check.  See Complaint, ¶¶ 22-24.  The plaintiff alleges that this violated the FCRA for two reasons.  First, because the disclosure form provided by Whole Foods provided both the disclosure and a release of liability, the form “did not consist solely of the disclosure,” as required by § 1681b(b)(2)(A)(i).  See id. at ¶¶ 22-24, 38.  Second, Whole Foods did not obtain the plaintiff’s authorization before ordering the background check.  See id. at ¶ 44.

In a bid to dismiss the case, Whole Foods argued that the disclosure and release of liability were made on two separate pages, and that the disclosure complied with § 1681b(b)(2)(A)(i) because it was provided to the employee by itself on a free-standing document.  See 8:14-cv-03035-RAL-TBM, Dkt. No. 35 (M.D.Fla.) (Order) at 7.  The court rejected this argument, holding that, because the court must draw favorable inferences to the plaintiff at the motion to dismiss stage, the allegations in the complaint were sufficient to avoid dismissal because the two pages could be “read as one document.”  See id.  Notably, the court also declined to stay the case pending the United States Supreme Court’s decision in Spokeo, Inc. v. Robinson which, as we reported, could have been dispositive in this case, if the Supreme Court holds that plaintiffs must demonstrate an injury-in-fact to demonstrate Article III standing under the FCRA.

The narrow lesson drawn from Speer is that the consumer report disclosure and authorization should be printed on a separate document in such a way that there can be no dispute that each form is a distinct stand-alone form.  For example, employers might consider numbering each form “page 1 of 1,” including language in the disclosure making it clear that it is a stand-alone form, and requiring the employee to sign the form separately.  But Speer also serves to illustrate the broader point that, as we cautioned last year, employers must be very careful to comply strictly with the FCRA’s consumer report requirements.  The FCRA has very specific requirements and provides for generous recovery—including costs, attorney’s fees, and a low bar for punitive damages (the Supreme Court has held that “reckless disregard” of the FCRA’s requirements satisfies the willfulness requirement 15 U.S.C. 1681n(a)(1)(2), sufficient to award punitive damages under the statute)—which makes causes of action under the FCRA attractive grounds for suit.  LenderLaw Watch will continue to monitor FCRA developments, and bring you additional updates as they happen.

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