This report provides information about An Analysis of on  Identity Theft and the Fair Credit Reporting Act. This report will provide a brief summary of the fair credit reporting act provisions in question, as well as an analysis of the recent supreme court decisions

Welborn, Angie A.

UNT Digital Library

1 For more information on remedies available to victims of identity theft, see CRS ReportRS21163, Remedies Available to Victims of Identity Theft.2 P.L. 91-508, tit. 6, § 601, 84 Stat. 1128, 15 U.S.C. 1681 et. seq. For more information on theFair Credit Reporting Act, see CRS Report RL31666, Fair Credit Reporting Act: Rights andResponsibilities.Congressional Research Service ˜ The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS21083Updated September 12, 2003Identity Theft and the Fair Credit ReportingAct: An Analysis of TRW v. Andrews andCurrent LegislationAngie A. WelbornLegislative AttorneyAmerican Law DivisionSummaryOne of the ways in which victims of identity theft may recover for financial harmis by filing suit under the Fair Credit Reporting Act.1 However, the Act imposes a twoyear statute of limitations on suits filed. On November 13, 2001, the Supreme Courtdecided a case interpreting when the Act’s statute of limitations begins to run. In thatcase, the Court held that the statute of limitations begins to run when inaccuratedisclosures first occur, and not when the consumer learns of the inaccuracies in hisreport.Several pieces of legislation attempting to provide consumers with additional timeto file suit have been introduced in response to the Court’s decision. This report willprovide a brief summary of the Fair Credit Reporting Act provisions in question, as wellas an analysis of the recent Supreme Court decision and an overview of recentlegislation (S. 22, S. 1533, S. 1581 and H.R. 818) introduced in response to thatdecision. This report will be updated as events warrant.Fair Credit Reporting ActThe Fair Credit Reporting Act (FCRA) was enacted on October 26, 1970.2 Thepurpose of the FCRA is “to require that consumer reporting agencies adopt reasonableprocedures for meeting the needs of commerce for consumer credit, personnel, insurance,and other information in a manner which is fair and equitable to the consumer, withCRS-23 15 U.S.C. 1681(b).4 15 U.S.C. 1681a(f).5 15 U.S.C. 1681a(d). In addition to credit information, consumer reporting agencies are allowedto include information on the failure of the consumer to pay overdue child support, if suchinformation has been provided to the agency by a state or local child support enforcement agencyor verified by any state or federal government agency. This information remains on the consumerreport for up to 7 years. 15 U.S.C. 1681s-1.6 15 U.S.C. 1681e(b).7 15 U.S.C. 1681n; 15 U.S.C. 1681o.8 15 U.S.C. 1681p.9 Id.10 Id.11 122 S. Ct. 441 (2001).regard to the confidentiality, accuracy, relevancy, and proper utilization of suchinformation.”3 The FCRA applies to the files maintained by “consumer reportingagencies,” a term broadly defined to include anyone in the business of furnishing reportson the credit worthiness of consumers to third parties.4 Consumer credit reports generallyinclude information about a consumer’s “credit worthiness, credit standing, creditcapacity, character, general reputation, personal characteristics, or mode of living.”5 Thisinformation is gathered and sold to creditors, employers, landlords and other businesses.The FCRA outlines a consumer’s rights in relation to his or her credit report, as well aspermissible uses for credit reports and disclosure requirements. In addition, the FCRArequires credit reporting agencies to follow “reasonable procedures to assure maximumpossible accuracy of the information concerning the individual about whom the reportrelates.”6The FCRA allows consumers to file suit for violations of the Act, which couldinclude the disclosure of inaccurate information about a consumer by a credit reportingagency.7 A consumer who is a victim of identity theft could file suit against a creditreporting agency for the agency’s failure to verify the accuracy of information containedin the report and the agency’s disclosure of inaccurate information as a result of theconsumer’s stolen identity. Generally, the FCRA requires consumer to file suit “withintwo years from the date on which the liability arises.”8 However, there is an exception incases where there was willful misrepresentation of information that is required to bedisclosed to a consumer and such information is material to the establishment of thedefendant’s liability.9 In such cases, the action “may be brought any time within twoyears after the discovery by the individual of the misrepresentation.”10TRW v. AndrewsThe plaintiff in TRW v. Andrews was a victim of identity theft.11 An imposter, whohad the same last name and first initial as the plaintiff, obtained Andrews’ social securitynumber and attempted to open numerous credit accounts under the imposter’s name. Onfour occasions, the creditors responding to the impostor’s applications sought reportsCRS-312 122 S. Ct. 445.13 Id.14 Id. Not relevant to the Supreme Court’s opinion was an additional claim by Andrews thatTRW failed to “follow reasonable procedures to assure maximum possible accuracy of theinformation” in the reports, in violation of 15 U.S.C. 1681e(b). This claim was resolved by a juryin favor of TRW. Id at 446, note 3.15 122 S. Ct. at 446.16 Andrews v. Trans Union Corp., 7 F. Supp.2d 1056, 1066-1067 (CD Cal. 1998).17 7 F. Supp.2d at 1068-1071.18 Andrews v. TRW, 225 F.3d 1063, 1066 (9th Cir. 2000).from TRW, a credit reporting agency. TRW matched the social security number, lastname, and first initial with Andrews’ file and disclosed her credit history to the creditors.Andrews did not learn of the disclosures until she attempted to refinance her homeand requested a copy of her credit report, which reflected the impostor’s activity. TRWcorrected Andrews’ file when notified of the mistakes. However, Andrews alleged thatthe blemishes on her credit report “forced her to abandon her refinancing efforts and settlefor an alternative line of credit on less favorable terms.”12Andrews filed suit against TRW on October 21, 1996, approximately 17 monthsafter she became aware of the inaccurate information on her credit report and more thantwo years after TRW made the two initial disclosures.13 Andrews alleged that TRW’sfailure to verify, prior to disclosing information to creditors, that she initiated the requestsor was otherwise involved in the underlying transactions was in violation of the FairCredit Reporting Act’s requirement that credit reporting agencies maintain reasonableprocedures to avoid improper disclosures.14 By failing to verify that Andrews was theinitiator of the requests, Andrews alleged that TRW facilitated the identity theft. Shesought injunctive relief, punitive damages and other compensation.TRW argued that Andrews’ claims based on the two earliest disclosures were barredbecause the Fair Credit Reporting Act’s two year statute of limitations had expired.15Andrews countered that all of her claims were timely because the statute of limitations didnot toll until the date she learned of the inaccurate disclosures. This argument was basedupon Andrews’ contention that the FCRA incorporated a general federal rule which tollsthe statute of limitations at the time the plaintiff becomes aware of the injury. TheDistrict Court agreed with TRW, and held that a general federal discovery rule was notincorporated into the Fair Credit Reporting Act, thus barring Andrews’ claims based onthe two earliest disclosures.16 The District Court also granted TRW’s motion forsummary judgement on the two remaining claims, finding that TRW had maintainedadequate procedures to avoid improper disclosures.17The Ninth Circuit Court of Appeals reversed the District Court, applying the “generalfederal rule . . . that a federal statue of limitations begins to run when a party knows or hasreason to know that she was injured.”18 The Ninth Circuit rejected the District Court’sassertion that the text of 15 U.S.C. 1681p, including the exception to the commencementof the statute of limitations, precluded the application of general federal discovery rules,CRS-419 225 F.3d at 1067.20 Id. at 1066.21 122 S. Ct. at 446.22 Id at 447.23 15 U.S.C. 1681p.24 122 S. Ct. at 447.25 Id. at 447, citing Andrus v. Glover Constr. Co., 446 U.S. 608, 616-617 (1980).26 Id.27 Id. at 449 (citations omitted).holding that “unless Congress has expressly legislated otherwise the equitable doctrinefo discovery is read into every federal statute of limitations.”19 The court concluded thatsince the Fair Credit Reporting Act contained no express legislative directive the generalrule applied, thus the statute of limitations had not expired on any of Andrews’ claims.20TRW appealed to the Supreme Court, which reversed the Ninth Circuit’s decision,stating that the Ninth Circuit “conspicuously overstated” the scope and force of thepresumption that general discovery rules apply unless Congress has expressly legislatedotherwise.21 The Court said that while some lower federal courts have applied a generaldiscovery rule when a statute is silent on the issue, the Supreme Court has not adoptedthat position. Furthermore, the Court stated that it had “never endorsed the NinthCircuit’s view that Congress can convey its refusal to adopt a discovery rule only byexplicit command, rather than by implication from the structure or text of the particularstatute.”22While the Ninth Circuit correctly noted that the Fair Credit Reporting Act containsno specific directive against the application of general federal discovery rules, the Courtnoted that the statute does set forth a specific statute of limitations, along with a singleexception to the general rule.23 Based upon the text and structure of the statute inquestion, the Supreme Court determined that Congress’ “intent to preclude judicialimplication of a discovery rule” was clear.24 Citing an earlier case, the Court held that“[w]here Congress explicitly enumerates certain exceptions to a general prohibition,additional exceptions are not to be implied, in the absence of evidence of a contrarylegislative intent.”25 Applying general principles of statutory construction, the Courtreasoned that “Congress implicitly excluded a general discovery rule by explicitlyincluding a more limited one.”26 To allow the incorporation of a general rule in light ofthis fact, would have the practical effect of rendering the stated exception to the generalrule “entirely superfluous in all but the most unusual circumstances,” thus violating a“cardinal principal of statutory construction” - that “a statute ought, upon the whole, tobe so construed that, if it can be prevented, no clause, sentence, or word shall besuperfluous, void or insignificant.”27As if anticipating the Court’s decision, Andrews argued that if the statute oflimitations was to commence on the date on which liability arises, the date should be thedate on which the inaccuracies come to the attention of the potential plaintiff, rather thanCRS-528 Id. at 449.29 Id at 450.30 Id. at 451.31 S. 22, Sec. 3114, 108th Cong.32 S. 1533, Sec. 4, 108th Cong.33 Id.the date on which the credit reporting agency made the inaccurate disclosure.28 Andrewsrelied on legislative history pointing to Congress’ consideration of alternative languagein making her argument. The Court rejected Andrews’ reliance on legislative historynoting that TRW was able to present information to the contrary.29 The Court alsorejected Andrews’ argument that liability did not arise until actual damages materialized.Refusing to address the issue because it was not raised earlier, the Court doubted that theargument would have aided Andrews due to the fact that Andrews’ alleged damagesbegan to materialize when the inaccurate disclosures were made, causing the statute oflimitations to toll at the same time as under the statutory language in question.30By reversing the Ninth Circuit’s decision, the Supreme Court barred Andrews’claims based upon the two earliest disclosures. The case was remanded for furtherproceedings consistent with the opinion, presumably allowing Andrews to go forwardwith the other claims.Legislative ProposalsSeveral bills related to identity theft have been introduced in the 108th Congress. Atleast four of these bills include a provision to amend the Fair Credit Reporting Act’sstatute of limitations. To date, no action has been taken on any of the bills discussedbelow.S. 22, the Justice Enhancement and Domestic Security Act of 2003, would amendthe Fair Credit Reporting Act’s statute of limitations generally to allow suit to be brought“not later than 2 years from the date of the defendant’s violation of any requirement under[the Act].”31 In cases where the defendant “materially and willfully misrepresented anyinformation required to be disclosed to an individual,” an action may be brought “at anytime within 2 years after the date of discovery by the individual of the misrepresentation.”If the plaintiff is a victim of identity theft, the statute of limitations would be extended to4 years from the date of the defendant’s violation.S. 1533, the Identity Theft Victims Assistance Act of 2003, would amend theFCRA’s statute of limitations to allow victims of identity theft to file suit not later than5 years from the date of the defendant’s violation.32 Other suits could be filed “not laterthan 2 years from the date of the defendant’s violation,” or in any case in which thedefendant has materially and willfully misrepresented any information required to bedisclosed under the Act, “at any time within 2 years after the date of discovery by theindividual of the misrepresentation.”33CRS-634 S. 1581, Sec. 4, 108th Cong.35 H.R. 818, Sec. 3, 108th Cong.S. 1581, also entitled the Identity theft Victims Assistance Act of 2003, is similar toS. 1533, except that it requires victims of identity theft to file suit not later than 4 yearsfrom the date of the defendant’s violation.34H.R. 818, the Identity Theft Consumer Notification Act, would amend the FairCredit Reporting Act’s statute of limitations to allow suit to be brought “not later than 2years after the date on which the violation is discovered or should have been discoveredby the exercise of reasonable diligence.”35

Identity Theft and the Fair Credit Reporting Act: An Analysis of

1 For more information on remedies available to victims of identity theft, see CRS ReportRS21163, Remedies Available to Victims of Identity Theft.2 Pub. L. 91-508, tit. 6, § 601, 84 Stat. 1128, 15 U.S.C. 1681 et. seq.Congressional Research Service ˜ The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS21083Updated February 27, 2003Identity Theft and the Fair Credit ReportingAct: An Analysis of TRW v. Andrews andCurrent LegislationAngie A. WelbornLegislative AttorneyAmerican Law DivisionSummaryOne of the ways in which victims of identity theft may recover for financial harmis by filing suit under the Fair Credit Reporting Act.1  However, the Act imposes a twoyear statute of limitations on suits filed.  On November 13, 2001, the Supreme Courtdecided a case interpreting when the Act’s statute of limitations begins to run.  In thatcase, the Court held that the statute of limitations begins to run when inaccuratedisclosures first occur, and not when the consumer learns of the inaccuracies in hisreport.Several pieces of legislation attempting to provide consumers with additional timeto file suit have been introduced in response to the Court’s decision. This report willprovide a brief summary of the Fair Credit Reporting Act provisions in question, as wellas an analysis of the recent Supreme Court decision and an overview of recentlegislation (S. 22 and H.R. 818) introduced in response to that decision.  This report willbe updated as events warrant. Fair Credit Reporting ActThe Fair Credit Reporting Act (FCRA) was enacted on October 26, 1970.2  Thepurpose of the FCRA is “to require that consumer reporting agencies adopt reasonableprocedures for meeting the needs of commerce for consumer credit, personnel, insurance,and other information in a manner which is fair and equitable to the consumer, withregard to the confidentiality, accuracy, relevancy, and proper utilization of suchCRS-23 15 U.S.C. 1681(b).4 15 U.S.C. 1681a(f).5 15 U.S.C. 1681a(d).  In addition to credit information, consumer reporting agencies are allowedto include information on the failure of the consumer to pay overdue child support, if suchinformation has been provided to the agency by a state or local child support enforcement agencyor verified by any state or federal government agency.  This information remains on the consumerreport for up to 7 years.  15 U.S.C. 1681s-1.6 15 U.S.C. 1681e(b).7 15 U.S.C. 1681n; 15 U.S.C. 1681o.8 15 U.S.C. 1681p.9 Id.10 Id.11 122 S. Ct. 441 (2001).information.”3  The FCRA applies to the files maintained by “consumer reportingagencies,” a term broadly defined to include anyone in the business of furnishing reportson the credit worthiness of consumers to third parties.4 Consumer credit reports generallyinclude information about a consumer’s “credit worthiness, credit standing, creditcapacity, character, general reputation, personal characteristics, or mode of living.”5  Thisinformation is gathered and sold to creditors, employers, landlords and other businesses.The FCRA outlines a consumer’s rights in relation to his or her credit report, as well aspermissible uses for credit reports and disclosure requirements.  In addition, the FCRArequires credit reporting agencies to follow “reasonable procedures to assure maximumpossible accuracy of the information concerning the individual about whom the reportrelates.”6The FCRA allows consumers to file suit for violations of the Act, which couldinclude the disclosure of inaccurate information about a consumer by a credit reportingagency.7  A consumer who is a victim of identity theft could file suit against a creditreporting agency for the agency’s failure to verify the accuracy of information containedin the report and the agency’s disclosure of inaccurate information as a result of theconsumer’s stolen identity.  Generally, the FCRA requires consumer to file suit “withintwo years from the date on which the liability arises.”8  However, there is an exception incases where there was willful misrepresentation of information that is required to bedisclosed to a consumer and such information is material to the establishment of thedefendant’s liability.9  In such cases, the action “may be brought any time within twoyears after the discovery by the individual of the misrepresentation.”10TRW v. AndrewsThe plaintiff in TRW v. Andrews was a victim of identity theft.11  An imposter, whohad the same last name and first initial as the plaintiff, obtained Andrews’ social securitynumber and attempted to open numerous credit accounts under the imposter’s name.  Onfour occasions, the creditors responding to the impostor’s applications sought reportsfrom TRW, a credit reporting agency.  TRW matched the social security number, lastname, and first initial with Andrews’ file and disclosed  her credit history to the creditors.CRS-312 122 S. Ct. 445.13 Id.14 Id.  Not relevant to the Supreme Court’s opinion was an additional claim by Andrews thatTRW failed to “follow reasonable procedures to assure maximum possible accuracy of theinformation” in the reports, in violation of 15 U.S.C. 1681e(b).  This claim was resolved by a juryin favor of TRW.  Id at 446, note 3.15 122 S. Ct. at 446.16 Andrews v. Trans Union Corp., 7 F. Supp.2d 1056, 1066-1067 (CD Cal. 1998).17 7 F. Supp.2d at 1068-1071.18 Andrews v. TRW, 225 F.3d 1063, 1066 (9th Cir. 2000).Andrews did not learn of the disclosures until she attempted to refinance her homeand requested a copy of her credit report, which reflected the impostor’s activity.  TRWcorrected Andrews’ file when notified of the mistakes.  However, Andrews alleged thatthe blemishes on her credit report “forced her to abandon her refinancing efforts and settlefor an alternative line of credit on less favorable terms.”12Andrews filed suit against TRW on October 21, 1996, approximately 17 monthsafter she became aware of the inaccurate information on her credit report and more thantwo years after TRW made the two initial disclosures.13  Andrews alleged that TRW’sfailure to verify, prior to disclosing information to creditors, that she initiated the requestsor was otherwise involved in the underlying transactions was in violation of the FairCredit Reporting Act’s requirement that credit reporting agencies maintain reasonableprocedures to avoid improper disclosures.14  By failing to verify that Andrews was theinitiator of the requests, Andrews alleged that TRW facilitated the identity theft. Shesought injunctive relief, punitive damages and other compensation.TRW argued that Andrews’ claims based on the two earliest disclosures were barredbecause the Fair Credit Reporting Act’s two year statute of limitations had expired.15Andrews countered that all of her claims were timely because the statute of limitations didnot toll until the date she learned of the inaccurate disclosures.  This argument was basedupon Andrews’ contention that the FCRA incorporated a general federal rule which tollsthe statute of limitations at the time the plaintiff becomes aware of the injury.  TheDistrict Court agreed with TRW, and held that a general federal discovery rule was notincorporated into the Fair Credit Reporting Act, thus barring Andrews’ claims based onthe two earliest disclosures.16  The District Court also granted TRW’s motion forsummary judgement on the two remaining claims, finding that TRW had maintainedadequate procedures to avoid improper disclosures.17The Ninth Circuit Court of Appeals reversed the District Court, applying the “generalfederal rule . . . that a federal statue of limitations begins to run when a party knows or hasreason to know that she was injured.”18  The Ninth Circuit rejected the District Court’sassertion that the text of 15 U.S.C. 1681p, including the exception to the commencementof the statute of limitations, precluded the application of general federal discovery rules,holding that “unless Congress has expressly legislated otherwise the equitable doctrineCRS-419 225 F.3d at 1067.20 Id. at 1066.21 122 S. Ct. at 446.22 Id at 447.23 15 U.S.C. 1681p.24 122 S. Ct. at 447.25 Id. at 447, citing Andrus v. Glover Constr. Co., 446 U.S. 608, 616-617 (1980).26 Id.27 Id. at 449 (citations omitted).fo discovery is read into every federal statute of limitations.”19  The court concluded thatsince the Fair Credit Reporting Act contained no express legislative directive the generalrule applied, thus the statute of limitations had not expired on any of Andrews’ claims.20TRW appealed to the Supreme Court, which reversed the Ninth Circuit’s decision,stating that the Ninth Circuit “conspicuously overstated” the scope and force of thepresumption that general discovery rules apply unless Congress has expressly legislatedotherwise.21  The Court said that while some lower federal courts have applied a generaldiscovery rule when a statute is silent on the issue, the Supreme Court has not adoptedthat position.  Furthermore, the Court stated that it had “never endorsed the NinthCircuit’s view that Congress can convey its refusal to adopt a discovery rule only byexplicit command, rather than by implication from the structure or text of the particularstatute.”22  While the Ninth Circuit correctly noted that the Fair Credit Reporting Act containsno specific directive against the application of general federal discovery rules, the Courtnoted that the statute does set forth a specific statute of limitations, along with a singleexception to the general rule.23  Based upon the text and structure of the statute inquestion, the Supreme Court determined that Congress’ “intent to preclude judicialimplication of a discovery rule” was clear.24  Citing an earlier case, the Court held that“[w]here Congress explicitly enumerates certain exceptions to a general prohibition,additional exceptions are not to be implied, in the absence of evidence of a contrarylegislative intent.”25  Applying general principles of statutory construction, the Courtreasoned that “Congress implicitly excluded a general discovery rule by explicitlyincluding a more limited one.”26  To allow the incorporation of a general rule in light ofthis fact, would have the practical effect of rendering the stated exception to the generalrule “entirely superfluous in all but the most unusual circumstances,” thus violating a“cardinal principal of statutory construction” - that “a statute ought, upon the whole, tobe so construed that, if it can be prevented, no clause, sentence, or word shall besuperfluous, void or insignificant.”27As if anticipating the Court’s decision, Andrews argued that if the statute oflimitations was to commence on the date on which liability arises, the date should be thedate on which the inaccuracies come to the attention of the potential plaintiff, rather thanCRS-528 Id. at 449.29 Id at 450. 30 Id. at 451.31 For an overview of legislation related to identity theft, see CRS Report RL31752, IdentityTheft: An Overview of Proposed Legislation.32 S. 1742, as passed, Sec. 4, 107th Cong.33 Id.34 S. 1723, Sec. 2, 107th Cong.the date on which the credit reporting agency made the inaccurate disclosure.28 Andrewsrelied on legislative history pointing to Congress’ consideration of alternative languagein making her argument.  The Court rejected Andrews’ reliance on legislative historynoting that TRW was able to present information to the contrary.29  The Court alsorejected Andrews’ argument that liability did not arise until actual damages materialized.Refusing to address the issue because it was not raised earlier, the Court doubted that theargument would have aided Andrews due to the fact that Andrews’ alleged damagesbegan to materialize when the inaccurate disclosures were made, causing the statute oflimitations to toll at the same time as under the statutory language in question.30By reversing the Ninth Circuit’s decision, the Supreme Court barred Andrews’claims based upon the two earliest disclosures.  The case was remanded for furtherproceedings consistent with the opinion, presumably allowing Andrews to go forwardwith the other claims.Legislative Proposals107th Congress.  In response to the Supreme Court’s opinion, the 107th Congressconsidered several pieces of legislation which would have allowed more time for victimsof identity theft to file suit under the Fair Credit Reporting Act.  Several of these bills arediscussed below.  This is not intended to be an exhaustive list of identity theft legislationconsidered during the 107th Congress.31On November 14, 2002, the Senate passed S. 1742, the Identity Theft VictimsAssistance Act of 2002.  If enacted, the legislation would have amended the statute oflimitations under the FCRA to allow suit to be brought “not later than 2 years from thedate of the defendant’s violation of any requirement under this title.”32  Actions by victimsof identity theft could be brought not later than 4 years from the date of the defendant’sviolation if the victim “has reasonable grounds to believe that [he or she] is the victim ofan identity theft; and has not materially and willfully misrepresented such a claim.”33 S. 1723, the Protect Victims of Identity Theft Act of 2001, would have also amendedthe Fair Credit Reporting Act’s statute of limitations.  The amendment would haveallowed suit to be filed “not later than 2 years after the date on which the violation isdiscovered or should have been discovered by the exercise of reasonable diligence.”34  Anidentical bill, H.R. 3368, was also introduced.CRS-635 H.R. 3369, Sec. 2, 107th Cong.36 S. 22, Sec. 3114, 108th Cong.37 H.R. 818, Sec. 3, 108th Cong.Another House bill, H.R. 3369, the Fair Credit Reporting Act Amendment of 2001,would have also allowed more time for suit to be filed in cases arising under the FairCredit Reporting Act.  H.R. 3369 would have amended the Act to allow suit to be filedwithin two years from the “earlier of the date on which the consumer discovers, or thedate by which the consumer reasonably should have discovered, the violation giving riseto the liability.”35 108th Congress. To date, several bills related to identity theft have been introducedin the 108th Congress.  At least two of these bills include a provision to amend the FairCredit Reporting Act’s statute of limitations.S. 22, the Justice Enhancement and Domestic Security Act of 2003, would amendthe Fair Credit Reporting Act’s statute of limitations generally to allow suit to be brought“not later than 2 years from the date of the defendant’s violation of any requirement under[the Act].”36  In cases where the defendant “materially and willfully misrepresented anyinformation required to be disclosed to an individual,” an action may be brought “at anytime within 2 years after the date of discovery by the individual of the misrepresentation.”If the plaintiff is a victim of identity theft, the statute of limitations would be extended to4 years from the date of the defendant’s violation.H.R. 818, the Identity Theft Consumer Notification Act, would amend the FairCredit Reporting Act’s statute of limitations to allow suit to be brought “not later than 2years after the date on which the violation is discovered or should have been discoveredby the exercise of reasonable diligence.”37

1 For more information on remedies available to victims of identity theft, see CRS ReportRS21163, Remedies Available to Victims of Identity Theft.2 P.L. 91-508, tit. 6, § 601, 84 Stat. 1128, 15 U.S.C. 1681 et. seq.  For more information on theFair Credit Reporting Act, see CRS Report RL31666, Fair Credit Reporting Act: Rights andResponsibilities. Congressional Research Service ˜ The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS21083Updated March 21, 2003Identity Theft and the Fair Credit ReportingAct: An Analysis of TRW v. Andrews andCurrent LegislationAngie A. WelbornLegislative AttorneyAmerican Law DivisionSummaryOne of the ways in which victims of identity theft may recover for financial harmis by filing suit under the Fair Credit Reporting Act.1  However, the Act imposes a twoyear statute of limitations on suits filed.  On November 13, 2001, the Supreme Courtdecided a case interpreting when the Act’s statute of limitations begins to run.  In thatcase, the Court held that the statute of limitations begins to run when inaccuratedisclosures first occur, and not when the consumer learns of the inaccuracies in hisreport.Several pieces of legislation attempting to provide consumers with additional timeto file suit have been introduced in response to the Court’s decision. This report willprovide a brief summary of the Fair Credit Reporting Act provisions in question, as wellas an analysis of the recent Supreme Court decision and an overview of recentlegislation (S. 22 and H.R. 818) introduced in response to that decision.  This report willbe updated as events warrant. Fair Credit Reporting ActThe Fair Credit Reporting Act (FCRA) was enacted on October 26, 1970.2  Thepurpose of the FCRA is “to require that consumer reporting agencies adopt reasonableprocedures for meeting the needs of commerce for consumer credit, personnel, insurance,and other information in a manner which is fair and equitable to the consumer, withregard to the confidentiality, accuracy, relevancy, and proper utilization of suchCRS-23 15 U.S.C. 1681(b).4 15 U.S.C. 1681a(f).5 15 U.S.C. 1681a(d).  In addition to credit information, consumer reporting agencies are allowedto include information on the failure of the consumer to pay overdue child support, if suchinformation has been provided to the agency by a state or local child support enforcement agencyor verified by any state or federal government agency.  This information remains on the consumerreport for up to 7 years.  15 U.S.C. 1681s-1.6 15 U.S.C. 1681e(b).7 15 U.S.C. 1681n; 15 U.S.C. 1681o.8 15 U.S.C. 1681p.9 Id.10 Id.11 122 S. Ct. 441 (2001).information.”3  The FCRA applies to the files maintained by “consumer reportingagencies,” a term broadly defined to include anyone in the business of furnishing reportson the credit worthiness of consumers to third parties.4 Consumer credit reports generallyinclude information about a consumer’s “credit worthiness, credit standing, creditcapacity, character, general reputation, personal characteristics, or mode of living.”5  Thisinformation is gathered and sold to creditors, employers, landlords and other businesses.The FCRA outlines a consumer’s rights in relation to his or her credit report, as well aspermissible uses for credit reports and disclosure requirements.  In addition, the FCRArequires credit reporting agencies to follow “reasonable procedures to assure maximumpossible accuracy of the information concerning the individual about whom the reportrelates.”6The FCRA allows consumers to file suit for violations of the Act, which couldinclude the disclosure of inaccurate information about a consumer by a credit reportingagency.7  A consumer who is a victim of identity theft could file suit against a creditreporting agency for the agency’s failure to verify the accuracy of information containedin the report and the agency’s disclosure of inaccurate information as a result of theconsumer’s stolen identity.  Generally, the FCRA requires consumer to file suit “withintwo years from the date on which the liability arises.”8  However, there is an exception incases where there was willful misrepresentation of information that is required to bedisclosed to a consumer and such information is material to the establishment of thedefendant’s liability.9  In such cases, the action “may be brought any time within twoyears after the discovery by the individual of the misrepresentation.”10TRW v. AndrewsThe plaintiff in TRW v. Andrews was a victim of identity theft.11  An imposter, whohad the same last name and first initial as the plaintiff, obtained Andrews’ social securitynumber and attempted to open numerous credit accounts under the imposter’s name.  Onfour occasions, the creditors responding to the impostor’s applications sought reportsfrom TRW, a credit reporting agency.  TRW matched the social security number, lastname, and first initial with Andrews’ file and disclosed  her credit history to the creditors.CRS-312 122 S. Ct. 445.13 Id.14 Id.  Not relevant to the Supreme Court’s opinion was an additional claim by Andrews thatTRW failed to “follow reasonable procedures to assure maximum possible accuracy of theinformation” in the reports, in violation of 15 U.S.C. 1681e(b).  This claim was resolved by a juryin favor of TRW.  Id at 446, note 3.15 122 S. Ct. at 446.16 Andrews v. Trans Union Corp., 7 F. Supp.2d 1056, 1066-1067 (CD Cal. 1998).17 7 F. Supp.2d at 1068-1071.18 Andrews v. TRW, 225 F.3d 1063, 1066 (9th Cir. 2000).Andrews did not learn of the disclosures until she attempted to refinance her homeand requested a copy of her credit report, which reflected the impostor’s activity.  TRWcorrected Andrews’ file when notified of the mistakes.  However, Andrews alleged thatthe blemishes on her credit report “forced her to abandon her refinancing efforts and settlefor an alternative line of credit on less favorable terms.”12Andrews filed suit against TRW on October 21, 1996, approximately 17 monthsafter she became aware of the inaccurate information on her credit report and more thantwo years after TRW made the two initial disclosures.13  Andrews alleged that TRW’sfailure to verify, prior to disclosing information to creditors, that she initiated the requestsor was otherwise involved in the underlying transactions was in violation of the FairCredit Reporting Act’s requirement that credit reporting agencies maintain reasonableprocedures to avoid improper disclosures.14  By failing to verify that Andrews was theinitiator of the requests, Andrews alleged that TRW facilitated the identity theft. Shesought injunctive relief, punitive damages and other compensation.TRW argued that Andrews’ claims based on the two earliest disclosures were barredbecause the Fair Credit Reporting Act’s two year statute of limitations had expired.15Andrews countered that all of her claims were timely because the statute of limitations didnot toll until the date she learned of the inaccurate disclosures.  This argument was basedupon Andrews’ contention that the FCRA incorporated a general federal rule which tollsthe statute of limitations at the time the plaintiff becomes aware of the injury.  TheDistrict Court agreed with TRW, and held that a general federal discovery rule was notincorporated into the Fair Credit Reporting Act, thus barring Andrews’ claims based onthe two earliest disclosures.16  The District Court also granted TRW’s motion forsummary judgement on the two remaining claims, finding that TRW had maintainedadequate procedures to avoid improper disclosures.17The Ninth Circuit Court of Appeals reversed the District Court, applying the “generalfederal rule . . . that a federal statue of limitations begins to run when a party knows or hasreason to know that she was injured.”18  The Ninth Circuit rejected the District Court’sassertion that the text of 15 U.S.C. 1681p, including the exception to the commencementof the statute of limitations, precluded the application of general federal discovery rules,holding that “unless Congress has expressly legislated otherwise the equitable doctrineCRS-419 225 F.3d at 1067.20 Id. at 1066.21 122 S. Ct. at 446.22 Id at 447.23 15 U.S.C. 1681p.24 122 S. Ct. at 447.25 Id. at 447, citing Andrus v. Glover Constr. Co., 446 U.S. 608, 616-617 (1980).26 Id.27 Id. at 449 (citations omitted).fo discovery is read into every federal statute of limitations.”19  The court concluded thatsince the Fair Credit Reporting Act contained no express legislative directive the generalrule applied, thus the statute of limitations had not expired on any of Andrews’ claims.20TRW appealed to the Supreme Court, which reversed the Ninth Circuit’s decision,stating that the Ninth Circuit “conspicuously overstated” the scope and force of thepresumption that general discovery rules apply unless Congress has expressly legislatedotherwise.21  The Court said that while some lower federal courts have applied a generaldiscovery rule when a statute is silent on the issue, the Supreme Court has not adoptedthat position.  Furthermore, the Court stated that it had “never endorsed the NinthCircuit’s view that Congress can convey its refusal to adopt a discovery rule only byexplicit command, rather than by implication from the structure or text of the particularstatute.”22  While the Ninth Circuit correctly noted that the Fair Credit Reporting Act containsno specific directive against the application of general federal discovery rules, the Courtnoted that the statute does set forth a specific statute of limitations, along with a singleexception to the general rule.23  Based upon the text and structure of the statute inquestion, the Supreme Court determined that Congress’ “intent to preclude judicialimplication of a discovery rule” was clear.24  Citing an earlier case, the Court held that“[w]here Congress explicitly enumerates certain exceptions to a general prohibition,additional exceptions are not to be implied, in the absence of evidence of a contrarylegislative intent.”25  Applying general principles of statutory construction, the Courtreasoned that “Congress implicitly excluded a general discovery rule by explicitlyincluding a more limited one.”26  To allow the incorporation of a general rule in light ofthis fact, would have the practical effect of rendering the stated exception to the generalrule “entirely superfluous in all but the most unusual circumstances,” thus violating a“cardinal principal of statutory construction” - that “a statute ought, upon the whole, tobe so construed that, if it can be prevented, no clause, sentence, or word shall besuperfluous, void or insignificant.”27As if anticipating the Court’s decision, Andrews argued that if the statute oflimitations was to commence on the date on which liability arises, the date should be thedate on which the inaccuracies come to the attention of the potential plaintiff, rather thanCRS-528 Id. at 449.29 Id at 450. 30 Id. at 451.31 For an overview of legislation related to identity theft, see CRS Report RL31752, IdentityTheft: An Overview of Proposed Legislation.32 S. 1742, as passed, Sec. 4, 107th Cong.33 Id.34 S. 1723, Sec. 2, 107th Cong.the date on which the credit reporting agency made the inaccurate disclosure.28 Andrewsrelied on legislative history pointing to Congress’ consideration of alternative languagein making her argument.  The Court rejected Andrews’ reliance on legislative historynoting that TRW was able to present information to the contrary.29  The Court alsorejected Andrews’ argument that liability did not arise until actual damages materialized.Refusing to address the issue because it was not raised earlier, the Court doubted that theargument would have aided Andrews due to the fact that Andrews’ alleged damagesbegan to materialize when the inaccurate disclosures were made, causing the statute oflimitations to toll at the same time as under the statutory language in question.30By reversing the Ninth Circuit’s decision, the Supreme Court barred Andrews’claims based upon the two earliest disclosures.  The case was remanded for furtherproceedings consistent with the opinion, presumably allowing Andrews to go forwardwith the other claims.Legislative Proposals107th Congress.  In response to the Supreme Court’s opinion, the 107th Congressconsidered several pieces of legislation which would have allowed more time for victimsof identity theft to file suit under the Fair Credit Reporting Act.  Several of these bills arediscussed below.  This is not intended to be an exhaustive list of identity theft legislationconsidered during the 107th Congress.31On November 14, 2002, the Senate passed S. 1742, the Identity Theft VictimsAssistance Act of 2002.  If enacted, the legislation would have amended the statute oflimitations under the FCRA to allow suit to be brought “not later than 2 years from thedate of the defendant’s violation of any requirement under this title.”32  Actions by victimsof identity theft could be brought not later than 4 years from the date of the defendant’sviolation if the victim “has reasonable grounds to believe that [he or she] is the victim ofan identity theft; and has not materially and willfully misrepresented such a claim.”33 S. 1723, the Protect Victims of Identity Theft Act of 2001, would have also amendedthe Fair Credit Reporting Act’s statute of limitations.  The amendment would haveallowed suit to be filed “not later than 2 years after the date on which the violation isdiscovered or should have been discovered by the exercise of reasonable diligence.”34  Anidentical bill, H.R. 3368, was also introduced.CRS-635 H.R. 3369, Sec. 2, 107th Cong.36 S. 22, Sec. 3114, 108th Cong.37 H.R. 818, Sec. 3, 108th Cong.Another House bill, H.R. 3369, the Fair Credit Reporting Act Amendment of 2001,would have also allowed more time for suit to be filed in cases arising under the FairCredit Reporting Act.  H.R. 3369 would have amended the Act to allow suit to be filedwithin two years from the “earlier of the date on which the consumer discovers, or thedate by which the consumer reasonably should have discovered, the violation giving riseto the liability.”35 108th Congress.  Several bills related to identity theft have been introduced in the108th Congress.  At least two of these bills include a provision to amend the Fair CreditReporting Act’s statute of limitations.  To date, no action has been taken on either bill.S. 22, the Justice Enhancement and Domestic Security Act of 2003, would amendthe Fair Credit Reporting Act’s statute of limitations generally to allow suit to be brought“not later than 2 years from the date of the defendant’s violation of any requirement under[the Act].”36  In cases where the defendant “materially and willfully misrepresented anyinformation required to be disclosed to an individual,” an action may be brought “at anytime within 2 years after the date of discovery by the individual of the misrepresentation.”If the plaintiff is a victim of identity theft, the statute of limitations would be extended to4 years from the date of the defendant’s violation.H.R. 818, the Identity Theft Consumer Notification Act, would amend the FairCredit Reporting Act’s statute of limitations to allow suit to be brought “not later than 2years after the date on which the violation is discovered or should have been discoveredby the exercise of reasonable diligence.”37

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Identity Theft and the Fair Credit Reporting Act: An Analysis of

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