Biden Administration Faces False Debt Reporting Lawsuits

The U.S. Supreme Court rejected an attempt by the Biden administration to avoid a lawsuit resulting from false debt reporting, with the landmark ruling to allow consumers to sue federal agencies.

The Supreme Court decided on Friday in a 9-0 decision that the federal government is not exempted from lawsuits brought under the Fair Credit Reporting Act (FCRA). FCRA is a law that lets consumers sue creditors for failing to fix false credit information that the consumer has requested be corrected.

The ruling results from a lawsuit brought under the FCRA by Reginald Kirtz, a Pennsylvania man whose credit score was damaged when the Department of Agriculture’s (USDA’s) Rural Housing Service falsely stated on his credit rep that some of his loans were overdue.

According to reports, Mr. Kirtz also accused the USDA of violating the FCRA when the agency reported his loans as overdue even though he had paid them off.

After several rounds of adjudication in lower courts, the government tried to dismiss the case, claiming it was immune from Kirtz’s complaint. This led to a review for a Supreme Court hearing.

The court later agreed in June 2023 to review an appeal court ruling that allowed Mr. Kirtz to sue the USDA for false debt reporting. The high court was then asked to rule on whether the civil-liability provisions of the FCRA unequivocally and unambiguously waive the sovereign immunity of the United States.

The ruling on February 8 was written by a former President Donald Trump appointee, Justice Neil Gorsuch.

“We think the Third Circuit reached the right decision in this case: The FCRA affects a clear waiver of sovereign immunity,” Gorsuch wrote.

Public Citizen Litigation Group attorney Nandan Joshi, who argued the case before the Supreme Court, praised the decision in a February 8 statement.

“Today’s decision confirms that federal agencies cannot escape accountability when they fail to comply with their responsibilities to consumers under the FCRA,” Joshi said. “As the court explained, FCRA’s text means what it says: The FCRA allows consumers to sue any ‘person’ that violates the statute and defines ‘person’ to include any government agency.”