H.R. 5775: FCRA Liability Harmonization Act

This bill, known as the FCRA Liability Harmonization Act, proposes amendments to the Fair Credit Reporting Act (FCRA), specifically targeting the civil liability standards that apply in class action lawsuits. The key components of the bill are as follows:

1. Changes to Willful Noncompliance Liability

The bill modifies the penalties for entities that willfully do not comply with the FCRA in class action lawsuits. Key points include:

• The previous language regarding damages determined by the court is adjusted to specify that the amount cannot exceed the lesser of:
  • $100,000, or
  • 40% of any damages awarded under the FCRA.
• It establishes that in class action cases, there are no minimum damage amounts per class member, providing courts the discretion to set the total damages without a predefined minimum.
• The overall recovery amount for a class in such cases is capped at the lesser of:
  • $500,000, or
  • 1% of the defendant’s net worth.
• Limits are also set on the costs and attorney fees, capping them at either $100,000 or a certain percentage of damages awarded, depending on which is lower.

2. Changes to Negligent Noncompliance Liability

The bill also addresses entities that negligently fail to comply with FCRA requirements. The amendments include:

• Similar caps on damages for negligent noncompliance as those for willful noncompliance, where the total damages cannot exceed:
  • $100,000, or
  • 40% of any actual damages determined by the court.
• In class action lawsuits regarding negligent actions, the recoverable amount is based on actual damages plus attorney fees and costs, with caps remaining the same as mentioned above.

3. General Implications

The amendments aim to streamline and clarify the liability framework under the FCRA, particularly in the context of class actions. The caps on damages and limits on legal fees are intended to reduce excessive claims against credit reporting entities and harmonize the liability standards across different types of compliance failures.

Relevant Companies

• CRNC - Cerence Inc.: As a company involved in AI and connected automotive solutions, changes in liability under the FCRA could impact how they manage consumer data.
• INTU - Intuit Inc.: As a provider of financial and credit reporting services, changes to compliance costs could affect their operations and legal risk management.
• EQIX - Equinix: Operating in the data center space, impacts on data handling compliance could influence their legal liabilities in credit reporting contexts.