US Supreme Court Divided on Government Liability Regarding Credit Report Errors

By John Kruzel

WASHINGTON (Reuters) – The Supreme Court of the United States appeared divided on Monday over whether the federal government can be held liable for errors related to consumer credit reports. The case involves a Pennsylvania man, Reginald Kirtz, who accused an Agriculture Department agency of making mistakes that negatively affected his credit status.

The justices heard arguments in an appeal by President Joe Biden’s administration of a lower court’s ruling that the legal doctrine of sovereign immunity does not protect the U.S. government from lawsuits regarding credit reporting inaccuracies.

The administration is attempting to block Kirtz’s lawsuit against the Rural Housing Service, an agency that provides loans to assist lower-income Americans in obtaining housing in rural areas. Kirtz filed the lawsuit seeking monetary damages under the Fair Credit Reporting Act, a law enacted in 1970 to ensure fair and accurate credit reporting.

The questions posed by the justices showed a split in opinion on the matter.

Kirtz claims that his loans were fully repaid, but the government lender and a separate private lender continued to report incorrectly that his accounts were past due, even after he raised concerns about the inaccuracies. These false reports were then transmitted to the credit reporting agency TransUnion, damaging Kirtz’s creditworthiness.

The Biden administration argues that the lawsuit should be dismissed under the principle of sovereign immunity, which generally protects the U.S. government from liability unless waived by law. The key question is whether Congress waived sovereign immunity in the Fair Credit Reporting Act.

The original version of the law in 1970 allowed credit bureaus to be sued for inaccuracies, but not the government. In 1996, Congress expanded the law to permit lawsuits against “persons” providing credit information to reporting agencies.

Kirtz’s lawyer, Nandan Joshi, urged the justices to interpret “persons” to include government agencies, citing the law’s definition of persons as: “any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.”

Justice Elena Kagan, known for her liberal stance, suggested that the case could be resolved in Kirtz’s favor by applying “statutory interpretation 101.”

“The logical implication of what Congress has done is authorize a suit against natural persons, enterprises, and governments,” Kagan argued.

Other justices expressed skepticism and suggested that a waiver of the government’s sovereign immunity should have been explicitly stated by Congress.

“I don’t think it realized that it was imposing this liability,” said conservative Justice Brett Kavanaugh, noting that the Congressional Budget Office did not estimate the potential litigation costs when sovereign immunity was waived.

The Fair Credit Reporting Act requires “persons” governed by the law to investigate disputes regarding the accuracy of credit information provided to reporting agencies. According to Kirtz’s lawsuit, the Agriculture Department failed to investigate his dispute about the accuracy of credit information provided by its agency to credit bureaus.

In 2021, a federal judge in Pennsylvania granted the Biden administration’s request to dismiss the case, ruling that the law “does not contain such an unambiguous waiver of sovereign immunity.” However, the 3rd U.S. Circuit Court of Appeals in Philadelphia reversed that decision last year.

(Reporting by John Kruzel; Editing by Will Dunham)


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