Justices Doubt Government Is Immune From Credit Error Suits

A majority of US Supreme Court justices seemed skeptical of the federal government’s claim that it can’t be sued for failing to correct inaccurate information that appears on consumer credit reports.

During oral arguments on Monday, Justices Neil Gorsuch and Clarence Thomas joined the court’s liberal wing in focusing on how Congress defined “persons” who are subject to the Fair Credit Reporting Act (FCRA) to include the government.

Gorsuch said this is where he “gets stuck.”

It doesn’t seem inconceivable that a rational Congress might, to protect consumers in FCRA, “say that the government should turn square corners too just like other private credit reporting agencies and that when it falsely reports a consumer’s debt, it should pay,” he said.

The justices are being asked if Congress waived the government’s sovereign immunity in FCRA’s enforcement provisions, which allow violators to be held liable for damages in civil lawsuits.

The US Court of Appeals for the Third Circuit said it did in ruling Reginald Kirtz could sue the Department of Agriculture for incorrectly reporting to TransUnion that his Rural Housing Service loans were past due and then failing to correct the error when he disputed it.

Congress expanded FCRA in 1996 beyond credit reporting agencies to include lenders and added a provision that required both to investigate the accuracy of account information that’s disputed by a consumer. The Third Circuit said in doing so Congress expressly defined which “persons” fell under the law and that included the government.

The Biden administration, which is appealing that decision, argues the ordinary definition of “persons” applies to the enforcement provisions and the government has sovereign immunity.

But Justice Elena Kagan asked what is the ordinary definition of “persons” and if it includes individuals, partnerships, corporations, trusts, estates, cooperatives, associations, and other entities.

Benjamin Snyder, an assistant to the solicitor general, agreed it did. “Just not governments,” he said.

“Just not governments,” Kagan repeated. “I mean, that’s a strange way to read a defined term, right?”

Justice Brett Kavanaugh, meanwhile, seemed concerned about how a ruling for Kirtz could impact the government financially, asking how much it would cost if it lost this case.

Snyder said there’s a class action pending in the lower court now that the could result in millions of dollars in damages.

Chief Justice John Roberts seemed to suggest it’s implausible FCRA allows the government to be sued. He noted the court has ruled that sometimes implausibility arguments can trump what’s otherwise a pretty precise reading of a statute’s language.

If this statute is ambiguous, sovereign immunity favors the government, said Nandan Joshi, an attorney with Public Citizen Litigation Group who argued for Kirtz.

But, “there’s nothing improbably broad about defining ‘person’ to include the government,” he said.

The case is Department of Agriculture Rural Development Rural Housing Service v. Kirtz, U.S., No. 22-846, oral argument 11/6/23.