On September 7, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing on six proposed bills for creating a “more efficient federal financial regulatory regime.” Among the bills heard was the FCRA Liability Harmonization Act (H.R. 2359), sponsored by Representative Barry Loudermilk (R-GA), which seeks to align FCRA class action liability with that of other federal consumer protection laws by imposing damages caps and other restrictions. Key amendments proposed by the Harmonization bill include:
- removing the availability of punitive damages for willful noncompliance;
- removing mandatory minimum statutory damages in class actions; and
- capping total class action damages at $500,000 or 1% of the defendant’s net worth, whichever is less.
The Harmonization bill would not restrict individual lawsuits and would preserve a consumer’s ability to be compensated for actual injury, while placing reasonable limitations on a defendant’s total class action liability. The stated intent of the bill is to eliminate in terrorem settlements resulting from the FCRA’s mandatory award of per-class member minimum statutory damages for willful noncompliance, even where the claim alleges only a technical FCRA violation and no actual harm to any consumer. In support of the bill, Rep. Loudermilk cited such a no-injury case where the defendant paid $3 million to settle out of court, each class member received $15, and the plaintiff’s counsel received $1 million.
Among the six legislative proposals that were heard, the Harmonization bill received significant attention from both the Subcommittee and witnesses. The bill received opposition from consumer advocate Ms. Chi Chi Wu, who claimed it would “drastically reduce accountability for violations of the [FCRA]” and cited examples of consumers who spent years attempting to fix incorrect information in their credit reports. Ranking Democrat Lacy Clay (DMO) also claimed the bill would “gut” existing consumer protections. In response, Representative Loudermilk emphasized that the Harmonization bill would not restrict individual lawsuits and would not affect the claims of the consumers Ms. Chi Wu referenced in her verbal statement.
Significantly, Democratic Representative David Scott (D-GA) discussed how “the business community suffers from so many frivolous lawsuits” and praised the Harmonization bill as seeking “to strike a delicate balance” between an individual’s right to be compensated for actual injury while imposing class action caps that are now “standard procedure” among other agencies in the federal government. A video recording of the September 7 hearing is available here.