Members today have greater access to and more knowledge of the information in their consumer reports than ever before. Non-compliance can lead to regulatory criticism, reputational damage, and monetary loss. Under Section 617 of the Fair Credit Report Act, negligent noncompliance can result in liability for actual damages, attorney fees and costs for bringing the action. Under Section 616, willful noncompliance can result in statutory damages of up to $1000 plus punitive damages, attorney fees and costs.

On March 27, 2012, the Tennessee Supreme Court in Discover Bank v. Morgan held that damages can include ascertainable loss of credit. For example, if a member could prove that they were denied credit from credit union A because incorrect information provided to a consumer reporting agency from credit union B lowered their credit score, the member now has Tennessee case law to support their claim for damages against credit union B. Using this reasoning, a court could also find that credit granted at a higher rate because of incorrect information provided to a consumer reporting agency could also be considered damages. The potential for consumers to claim damages is almost unlimited, ranging from not qualifying for 0% financing for a new car to not being able to buy a house.

Credit unions should make sure that they have adequate policies and procedures in place in ensure compliance with all aspects of the Fair Credit Reporting Act. Among the items that these policies and procedures should address are...

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