The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Fair Credit Act Legal Considerations

Reference Number: MTAS-1912
Tennessee Code Annotated
Reviewed Date: February 23, 2017
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Employers who fail to comply with the rules are subject to FTC fines and penalties, which can be substantial if a large number of files are involved. In the event a person willfully fails to comply with any requirement imposed by the law, the employer is liable to that consumer in an amount equal to the sum of (a) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000 or in the case of liability of a natural person for obtaining a consumer report under false pretenses or knowingly without a permissible purpose, actual damages sustained by the consumer as a result of the failure or $1,000, whichever is greater. 15 U.S.C. §§ 1681. The person could also be held liable for such amount of punitive damages as the court may allow (15 U.S.C. §§ 1681(n)(2)) and, in the case of any successful action to enforce any liability, the cost of the action together with reasonable attorney’s fees as determined by the court. 15 U.S.C. §§ 616(a)(3).

In the event of a knowing violation, the individual/company that obtains the consumer report is liable to the consumer reporting agency for actual damages sustained by the consumer reporting agency or $1,000 whichever is greater. 15 U.S.C. § 616(b). Additionally, if the state has reason to believe that any person has violated the act, it may bring action to enjoin such violation in any appropriate United States district court and fine such person damages of not more than $1,000 for each willful or negligent violation. In the case of any successful action, the individual/company will have to pay for the cost of the action and reasonable attorney fees as determined by the court. 15 U.S.C. §§ 621(c)(1). If your city routinely conducts credit checks on applicants or employees, you may want to consider only conducting the checks on positions involving money (finance department employees, police officers, etc.). Then be sure to provide notice and follow the guidelines when an adverse decision is made.

Additionally, Section 1681(n)(3)(b) gives the Federal Trade Commission authority to seek civil penalties for violations of the FCRA in an amount not more than $1,000 per violation. In setting a civil penalty amount, it requires a court to consider “the degree of culpability, any history of prior such conduct, ability to pay, effect on ability to continue to do business, and such other matters as justice may require.”

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