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Section 1681h of the Fair Credit Reporting Act grants limited qualified immunity to creditors, stating that:

[...] no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence [...] except as to false information furnished with malice or willful intent"

It is well-established that such claims are prohibited in litigation. However, this statute was drafted in mid-1990s, prior to the ubiquity of arbitration clauses in consumer contracts. Does 1681h prohibit a consumer from stating such a claim in arbitration?

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The statute referenced, 15 USC 1681h(e) (which is Section 610 of the Act), states:

(e) Limitation of liability. Except as provided in sections 616 and 617 [§§ 1681n and 1681o] of this title, no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant to section 609, 610, or 615 [§§ 1681g, 1681h, or 1681m] of this title or based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report, except as to false information furnished with malice or willful intent to injure such consumer.

The referenced remedies (and one additional section) are as follows:

§ 616. Civil liability for willful noncompliance [15 U.S.C. § 1681n]

(a) In general. Any person who willfully fails to comply with any requirement imposed under this title with respect to any consumer is liable to that consumer in an amount equal to the sum of

(1) (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

(B) 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;

(2) such amount of punitive damages as the court may allow; and

(3) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.

(b) Civil liability for knowing noncompliance. Any person who obtains a consumer report from a consumer reporting agency under false pretenses or knowingly without a permissible purpose shall be liable to the consumer reporting agency for actual damages sustained by the consumer reporting agency or $1,000, whichever is greater.

(c) Attorney’s fees. Upon a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.

(d) Clarification of willful noncompliance. For the purposes of this section, any person who printed an expiration date on any receipt provided to a consumer cardholder at a point of sale or transaction between December 4, 2004, and the date of the enactment of this subsection but otherwise complied with the requirements of section 605(g) for such receipt shall not be in willful noncompliance with section 605(g) by reason of printing such expiration date on the receipt.

§ 617. Civil liability for negligent noncompliance [15 U.S.C. § 1681o]

(a) In general. Any person who is negligent in failing to comply with any requirement imposed under this title with respect to any consumer is liable to that consumer in an amount equal to the sum of

(1) any actual damages sustained by the consumer as a result of the failure; and

(2) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.

(b) Attorney’s fees. On a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.

§ 618. Jurisdiction of courts; limitation of actions [15 U.S.C. § 1681p]

An action to enforce any liability created under this title may be brought in any appropriate United States district court, without regard to the amount in controversy, or in any other court of competent jurisdiction, not later than the earlier of (1) 2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or (2) 5 years after the date on which the violation that is the basis for such liability occurs.

The intent of Section 610(e) is to make Section 616 and 617 the exclusive remedies for a violation of the Act, without regard to common law.

Normally, there would not be a contract between a consumer and either a credit reporting agency or a user of a report from a credit reporting agency, in which an arbitration clause could be inserted, although arbitration was compelled in one recent case against an employer with an arbitration clause in the face of an argument that the dispute involved pre-contractual conduct of the parties. Alvarado v. Lowe’s Home Centers, LLC, 18-cv-03591, 2018 WL 6697181 (N.D. Cal. June 15, 2018). See also Peterson v. Lyft, Inc..

But there would often be a contract between the consumer and a business that makes a credit report to the credit reporting agency, and that contract would often contain an arbitration clause. In those cases, arbitration is allowed, but there can be issues over whether the scope of the arbitration agreement includes credit reporting disputes. These tend to be resolved in favor of the party seeking arbitration, however, as was in the case in the 11th Circuit decision in Hearn v. Comcast Cable Communications, LLC.

An arbitration clause that purported to change the substantive law of the FCRA would probably be declared invalid. But if the arbitrator, in fact, ignored the clear terms of the FCRA and ruled incorrectly, there would be no way for the consumer to challenge the ruling.

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  • If both parties proceed to the arbitration hearing, and the arbitrator relies on substantive law when considering an award -- is a consumer likely to win based on a claim that is clearly within the scope of 1681h(e)? Seems to hinge on whether "proceeding" is interpreted to encompass litigation only, or litigation and arbitration. – Josh Johnson May 25 at 2:31
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    You imply (and I’m sure it’s not intentional) that an arbitration agreement is part of a larger contract. While such contracts often contain arbitration clauses, they form a separate arbitration contract due to the severability principle. Indeed, the arbitration clauses can be binding even if the larger contract is void. Whether the arbitration agreement covers just the contract or the wider “relationship” turns on their wording. Also, parties can agree to arbitrate at any time, not just at contract formation. – Dale M May 25 at 9:12
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    @DaleM The law of severability it too much to include in an answer to this question which doesn't ask what specifically one has to do in terms of details of what must be agreed to make an arbitration forum applicable (and I'm not really free to comment on that anyway, as I am currently litigating it). Free standing arbitration clauses between parties who have no other contracts with each other don't actually ever happen, although sometimes old contracts are modified to add arbitration. Also, empirically, no one ever agrees to post-dispute arbitration. – ohwilleke May 25 at 17:20
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    @JoshJohnson The distinction you make over whether a proceeding encompasses litigation only turns out not to be the important one. Subject to select exceptions rarely applicable to the FCRA, anything that can be dealt with in civil litigation can be arbitrated if this forum is agreed to by the parties. A more notable exception would be criminal cases and other cases brought by the government even if on behalf of people agreeing to the clause. – ohwilleke May 25 at 17:22
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    @JoshJohnson The arbitrator is likely to hold a hearing at which all evidence is presented and all legal arguments are presented without considering dispositive motions and then to enter a half page order without legal or factual analysis that produces an award less than any plausible award for prevailing on any theory and more than any plausible award amount to a defense verdict. The order will probably spell a party's name wrong and require a slight clerical amendment. The quality of adjudication in arbitration is very low since there are no consequences for getting it wrong. – ohwilleke May 25 at 23:18

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