Identity Theft and the Fair Credit Reporting Act: An Analysis of TRW v. Andrews and Current Legislation

Identity Theft and the Fair Credit Reporting Act: An Analysis of TRW v. Andrews and Current Legislation

Order Code RS21083
Updated January 5, 2004
CRS Report for Congress
Received through the CRS Web
Identity Theft and the Fair Credit Reporting
Act: An Analysis of TRW v. Andrews and
Current Legislation
Angie A. Welborn
Legislative Attorney
American Law Division
Summary
One of the ways in which victims of identity theft may recover for financial harm
is by filing suit under the Fair Credit Reporting Act.1 However, the Act imposes a two
year statute of limitations on suits filed. On November 13, 2001, the Supreme Court
decided a case interpreting when the Act’s statute of limitations begins to run. In that
case, the Court held that the statute of limitations begins to run when inaccurate
disclosures first occur, and not when the consumer learns of the inaccuracies in his
report.
Several pieces of legislation attempting to provide consumers with additional time
to file suit were introduced in response to the Court’s decision, and legislation was
enacted last year to extend the FCRA’s statute of limitations. This report will provide
a brief summary of the Fair Credit Reporting Act provisions in question, as well as an
analysis of the recent Supreme Court decision and an overview of recently enacted
legislation (P.L. 108-159). This report will be updated as events warrant.
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) was enacted on October 26, 1970.2 The
purpose of the FCRA is “to require that consumer reporting agencies adopt reasonable
procedures for meeting the needs of commerce for consumer credit, personnel, insurance,
and other information in a manner which is fair and equitable to the consumer, with
1 For more information on remedies available to victims of identity theft, see CRS Report
RS21163, Remedies Available to Victims of Identity Theft.
2 P.L. 91-508, tit. 6, § 601, 84 Stat. 1128, 15 U.S.C. 1681 et. seq. For more information on the
Fair Credit Reporting Act, see CRS Report RL31666, Fair Credit Reporting Act: Rights and
Responsibilities.
Congressional Research Service ˜ The Library of Congress

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regard to the confidentiality, accuracy, relevancy, and proper utilization of such
information.”3 The FCRA applies to the files maintained by “consumer reporting
agencies,” a term broadly defined to include anyone in the business of furnishing reports
on the credit worthiness of consumers to third parties.4 Consumer credit reports generally
include information about a consumer’s “credit worthiness, credit standing, credit
capacity, character, general reputation, personal characteristics, or mode of living.”5 This
information is gathered and sold to creditors, employers, landlords and other businesses.
The FCRA outlines a consumer’s rights in relation to his or her credit report, as well as
permissible uses for credit reports and disclosure requirements. In addition, the FCRA
requires credit reporting agencies to follow “reasonable procedures to assure maximum
possible accuracy of the information concerning the individual about whom the report
relates.”6
The FCRA allows consumers to file suit for violations of the Act, which could
include the disclosure of inaccurate information about a consumer by a credit reporting
agency.7 A consumer who is a victim of identity theft could file suit against a credit
reporting agency for the agency’s failure to verify the accuracy of information contained
in the report and the agency’s disclosure of inaccurate information as a result of the
consumer’s stolen identity. Prior to the enactment of recent legislation, the FCRA
required a consumer to file suit “within two years from the date on which the liability
arises.”8
However, there was an exception in cases where there was willful
misrepresentation of information that is required to be disclosed to a consumer and such
information is material to the establishment of the defendant’s liability.9 In such cases,
the action could “be brought any time within two years after the discovery by the
individual of the misrepresentation.”10
TRW v. Andrews
The plaintiff in TRW v. Andrews was a victim of identity theft.11 An imposter, who
had the same last name and first initial as the plaintiff, obtained Andrews’ social security
number and attempted to open numerous credit accounts under the imposter’s name. On
four occasions, the creditors responding to the impostor’s applications sought reports
3 15 U.S.C. 1681(b).
4 15 U.S.C. 1681a(f).
5 15 U.S.C. 1681a(d). In addition to credit information, consumer reporting agencies are allowed
to include information on the failure of the consumer to pay overdue child support, if such
information has been provided to the agency by a state or local child support enforcement agency
or verified by any state or federal government agency. This information remains on the consumer
report for up to 7 years. 15 U.S.C. 1681s-1.
6 15 U.S.C. 1681e(b).
7 15 U.S.C. 1681n; 15 U.S.C. 1681o.
8 15 U.S.C. 1681p.
9 Id.
10 Id.
11 122 S. Ct. 441 (2001).

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from TRW, a credit reporting agency. TRW matched the social security number, last
name, and first initial with Andrews’ file and disclosed her credit history to the creditors.
Andrews did not learn of the disclosures until she attempted to refinance her home
and requested a copy of her credit report, which reflected the impostor’s activity. TRW
corrected Andrews’ file when notified of the mistakes. However, Andrews alleged that
the blemishes on her credit report “forced her to abandon her refinancing efforts and settle
for an alternative line of credit on less favorable terms.”12
Andrews filed suit against TRW on October 21, 1996, approximately 17 months
after she became aware of the inaccurate information on her credit report and more than
two years after TRW made the two initial disclosures.13 Andrews alleged that TRW’s
failure to verify, prior to disclosing information to creditors, that she initiated the requests
or was otherwise involved in the underlying transactions was in violation of the Fair
Credit Reporting Act’s requirement that credit reporting agencies maintain reasonable
procedures to avoid improper disclosures.14 By failing to verify that Andrews was the
initiator of the requests, Andrews alleged that TRW facilitated the identity theft. She
sought injunctive relief, punitive damages and other compensation.
TRW argued that Andrews’ claims based on the two earliest disclosures were barred
because the Fair Credit Reporting Act’s two year statute of limitations had expired.15
Andrews countered that all of her claims were timely because the statute of limitations did
not toll until the date she learned of the inaccurate disclosures. This argument was based
upon Andrews’ contention that the FCRA incorporated a general federal rule which tolls
the statute of limitations at the time the plaintiff becomes aware of the injury. The
District Court agreed with TRW, and held that a general federal discovery rule was not
incorporated into the Fair Credit Reporting Act, thus barring Andrews’ claims based on
the two earliest disclosures.16
The District Court also granted TRW’s motion for
summary judgement on the two remaining claims, finding that TRW had maintained
adequate procedures to avoid improper disclosures.17
The Ninth Circuit Court of Appeals reversed the District Court, applying the “general
federal rule . . . that a federal statue of limitations begins to run when a party knows or has
reason to know that she was injured.”18 The Ninth Circuit rejected the District Court’s
assertion that the text of 15 U.S.C. 1681p, including the exception to the commencement
of the statute of limitations, precluded the application of general federal discovery rules,
12 122 S. Ct. 445.
13 Id.
14 Id. Not relevant to the Supreme Court’s opinion was an additional claim by Andrews that
TRW failed to “follow reasonable procedures to assure maximum possible accuracy of the
information” in the reports, in violation of 15 U.S.C. 1681e(b). This claim was resolved by a jury
in favor of TRW. Id at 446, note 3.
15 122 S. Ct. at 446.
16 Andrews v. Trans Union Corp., 7 F. Supp.2d 1056, 1066-1067 (CD Cal. 1998).
17 7 F. Supp.2d at 1068-1071.
18 Andrews v. TRW, 225 F.3d 1063, 1066 (9th Cir. 2000).

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holding that “unless Congress has expressly legislated otherwise the equitable doctrine
fo discovery is read into every federal statute of limitations.”19 The court concluded that
since the Fair Credit Reporting Act contained no express legislative directive the general
rule applied, thus the statute of limitations had not expired on any of Andrews’ claims.20
TRW appealed to the Supreme Court, which reversed the Ninth Circuit’s decision,
stating that the Ninth Circuit “conspicuously overstated” the scope and force of the
presumption that general discovery rules apply unless Congress has expressly legislated
otherwise.21 The Court said that while some lower federal courts have applied a general
discovery rule when a statute is silent on the issue, the Supreme Court has not adopted
that position. Furthermore, the Court stated that it had “never endorsed the Ninth
Circuit’s view that Congress can convey its refusal to adopt a discovery rule only by
explicit command, rather than by implication from the structure or text of the particular
statute.”22
While the Ninth Circuit correctly noted that the Fair Credit Reporting Act contains
no specific directive against the application of general federal discovery rules, the Court
noted that the statute does set forth a specific statute of limitations, along with a single
exception to the general rule.23 Based upon the text and structure of the statute in
question, the Supreme Court determined that Congress’ “intent to preclude judicial
implication of a discovery rule” was clear.24 Citing an earlier case, the Court held that
“[w]here Congress explicitly enumerates certain exceptions to a general prohibition,
additional exceptions are not to be implied, in the absence of evidence of a contrary
legislative intent.”25 Applying general principles of statutory construction, the Court
reasoned that “Congress implicitly excluded a general discovery rule by explicitly
including a more limited one.”26 To allow the incorporation of a general rule in light of
this fact, would have the practical effect of rendering the stated exception to the general
rule “entirely superfluous in all but the most unusual circumstances,” thus violating a
“cardinal principal of statutory construction” - that “a statute ought, upon the whole, to
be so construed that, if it can be prevented, no clause, sentence, or word shall be
superfluous, void or insignificant.”27
As if anticipating the Court’s decision, Andrews argued that if the statute of
limitations was to commence on the date on which liability arises, the date should be the
date on which the inaccuracies come to the attention of the potential plaintiff, rather than
19 225 F.3d at 1067.
20 Id. at 1066.
21 122 S. Ct. at 446.
22 Id. at 447.
23 15 U.S.C. 1681p.
24 122 S. Ct. at 447.
25 Id. at 447, citing Andrus v. Glover Constr. Co., 446 U.S. 608, 616-617 (1980).
26 Id.
27 Id. at 449 (citations omitted).

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the date on which the credit reporting agency made the inaccurate disclosure.28 Andrews
relied on legislative history pointing to Congress’ consideration of alternative language
in making her argument. The Court rejected Andrews’ reliance on legislative history
noting that TRW was able to present information to the contrary.29 The Court also
rejected Andrews’ argument that liability did not arise until actual damages materialized.
Refusing to address the issue because it was not raised earlier, the Court doubted that the
argument would have aided Andrews due to the fact that Andrews’ alleged damages
began to materialize when the inaccurate disclosures were made, causing the statute of
limitations to toll at the same time as under the statutory language in question.30
By reversing the Ninth Circuit’s decision, the Supreme Court barred Andrews’
claims based upon the two earliest disclosures. The case was remanded for further
proceedings consistent with the opinion, presumably allowing Andrews to go forward
with the other claims.
Recently Enacted Legislation
H.R. 2622 was passed by both the House and the Senate during the first session of
the 108th Congress and was signed by the President on December 4, 2003.31 This
legislation amends the Fair Credit Reporting Act’s statute of limitations to allow suit to
be brought not later than the earlier of 2 years after the date of discovery by the plaintiff
of the violation that is the basis for such liability, or 5 years after the date on which the
violation occurred.32
28 Id. at 449.
29 Id. at 450.
30 Id.at 451.
31 Fair and Accurate Credit Transactions (FACT) Act of 2003, Pub. L. 108-159.
32 P.L. 108-159, Section 156.