Opinion
3:21-cv-374-JR
11-09-2021
MICHELLE WILLIAMS, Plaintiff v. TRANSUNION, LLC; EQUIFAX INFORMATION SERVICES, LLC; FEDLOAN SERVICING; AND DOES 1 THROUGH 100 inclusive, Defendants.
FINDINGS & RECOMMENDATION
Jolie A. Russo United States Magistrate Judge
Plaintiff brings this action alleging violation of the Fair Credit Reporting Act (FCRA). Defendant Pennsylvania Higher Education Assistance Agency, dba, FedLoan Servicing (FedLoan) moves for a judgment on the pleading pursuant to Fed.R.Civ.P. 12(c). For the reasons stated below, the motion should be denied.
ALLEGATIONS
FedLoan formerly serviced an account held by plaintiff. Plaintiff alleges the FedLoan account is closed due to a transfer in March 2017 and is therefore not currently past due. Complaint (ECF 1) at ¶ 10. Nonetheless, plaintiff alleges FedLoan is reporting her account with a current past due payment status. Id. at ¶ 11.
Plaintiff asserts the FICO score has become the standard measure of consumer credit risk utilized by 90% of lending institutions and that score is calculated using information in consumer credit reports maintained at credit reporting agencies (CRAs). Id. at ¶¶ 18, 23. Plaintiff alleges the FICO score is based on the premise that the information provided by the CRAs is accurate and complies with credit reporting industry standards. Id. at ¶ 25.
Plaintiff asserts 35% of a consumer's FICO score is based on payment history which refers to whether a consumer has paid their bills in the past, on time, late, or missed payments. Id. at ¶¶ 28-29. Plaintiff alleges the more recent, frequent, or severe the late payment information, the greater impact on a FICO Score. Plaintiff further notes that public record items, such as bankruptcy, foreclosure, judgments, and wage garnishments are also considered part of a consumer's payment history. Id. at ¶ 29. Plaintiff alleges when factoring in the severity of delinquent payments, a FICO score considers how late the payment continues to be, how much is owed, how recently this occurred, and how many delinquent accounts exist. However, once a delinquent account has been remedied, the longer the account stays current the more a consumer's FICO Score should increase. Id. at ¶ 30-31.
Plaintiff alleges
“When you apply for credit, lenders need a fast and consistent way to decide whether or not to loan you money.” See https://www.myfico.com/credit-education/whatis-a-fico-score. If a lender or employer did look past the FICO Score into a consumer's reports, chances are they either do not understand the tradeline meanings themselves, or, if they do and realize something appears incorrect, they are incapable of recalculating the complex mathematical algorithms in a FICO Score to take the found error into consideration. Therefore, most lenders and employers do not review individual accounts, just a consumer's FICO Score (or average of FICO Scores) in order to make “quicker decisions”. See Id.Id. at ¶ 34.
Plaintiff alleges her credit reports from major CRAs ordered on October 22, 2020, contain inaccurate, misleading, or incomplete information that did not comply with credit reporting industry standards. Id. at ¶ 52. Plaintiff asserts she disputed the inaccurate information (tradelines) regarding the FedLoan account, put FedLoan on notice of the inaccuracies, and requested updates to the derogatory reporting to ensure accuracy and completeness. Id. at ¶¶ 53-55.
Plaintiff alleges that as of March 2021, FedLoan continues “to report Plaintiff's account, beginning in 933353XXXXXXXXXXX, to Equifax [and TransUnion] with a current payment status of ‘[a]t least 120 days or more than four payments past due', even though the account is closed, has a zero balance, and was transferred in or about Mach of 2017.” Id. at ¶ 58. See also, id. at ¶ 59. Plaintiff alleges that FedLoan's incorrect reporting gives third parties viewing plaintiff's credit report the wrong impression that she is currently behind on her payment obligations which in turn adversely affect plaintiff's ability to obtain credit. Id. at ¶¶ 63-65.
Plaintiff asserts that as a consequence of the inaccurate reporting she has suffered emotional harm, physical sickness, excessive stress, and has been denied credit resulting in an inability to rebuild her credit. Id. at ¶¶ at 67-68.
DISCUSSION
The FCRA ensures, among other things, fair and accurate credit reporting. Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007). To this end, the FCRA requires CRAs to exercise assembly, evaluation, and dissemination of a consumer's credit with fairness, impartiality, and a respect for the consumer's right to privacy. 15 U.S.C. § 1681(a)(4). In addition, to ensure that credit reports are accurate, the FCRA imposes some duties on the sources (“furnishers”) that provide credit information to CRAs. Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1153 (9th Cir. 2009).
Here, plaintiff alleges FedLoan violated 15 U.S.C. § 1681s-2(b). This section obligates furnishers, upon notice of dispute to: (1) conduct an investigation with respect to the disputed information; (2) review all relevant information provided by the CRA; (3) report the results of the investigation to the CRA; (4) report those results to all other [CRAs] to which the person furnished the information if the investigation finds that the information is incomplete or inaccurate; and (5) permanently block the reporting of that item of information to the CRAs if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation. Id. at 1154.
FedLoan asserts that even assuming the truth of plaintiff's Complaint, and reasonable inferences drawn therefrom, they do not plausibly suggest plaintiff is entitled to relief under the FCRA. Specifically, FedLoan contends that it did not provide patently incorrect or misleading information in its reporting to CRAs.
A credit entry is inaccurate or incomplete within the meaning of section 1681s-2(b) if it is patently incorrect, or because it is misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions. Gorman, 584 F.3d at 1163. FedLoan asserts the information it provided to the CRAs is contained in its exhibit to the Amended Answer which shows that plaintiff's loan was not paid off, rather it shows plaintiff fell behind in making payments leading to a delinquency that lasted several months. See Ex. 1 (attached to Amended Answer) (ECF 17-1). Around June 2016 the loan started showing past due and remained that way until March 2017 when the loan was defaulted and transferred to the guarantor. The loan then shows as “E-Zero Balance and current account.” Id.
Plaintiff disputes this evidence arguing the exhibit is a purported representation of FedLoan's internal records on plaintiff's account and there is no evidence to show this information was what was actually transmitted to the CRAs. In response to the motion, plaintiff attaches the tradelines to which she refers to in her Complaint showing a balance of $0 as of March 13, 2017, closed account status, and a payment status of 120 days past due with the status last updated in March 2017 with respect to the TransUnion tradeline. The payment history entries also reflect 120 days past due from approximately July 2016 until February 2017 for TransUnion. See Exhibit 1 (attached to Plaintiff's Opposition) (ECF 22-1). Thus, the only reasonable inference to draw from this tradeline is that the last payment status showed 120 days past due, but that the account is closed with a zero balance. However, the Equifax tradeline shows account status as closed and a payment status of at least 120 days past due with a status update as of November 2020. It also shows a balance of $0, a monthly payment of $0, and a blank for the past due amount. But the payment history table reflects on time payments beginning March 2017. Id.
In ruling on a motion to dismiss or for judgment on the pleadings, the Court may consider documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading. Dent v. Cox Commc'ns Las Vegas, Inc., 502 F.3d 1141, 1143 (9th Cir. 2007). Plaintiff's complaint alludes to the tradelines from the CRAs that lenders see but the actual reports provided to CRAs are also necessarily referred to in the Complaint. It is unclear, however, if the exhibit provided in FedLoan's Amended Answer is what was actually reported or if it is only its internal record of the loan.
The issue is whether such allegations support a plausible suggestion that the material provided by FedLoan to the CRAs was misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions. In evaluating whether reported account information is materially misleading, courts assess the alleged inaccuracy in context of the report as a whole. See Settles v. Trans Union, LLC, 2020 WL 6900302, at *4 (M.D. Tenn. Nov. 24, 2020). Here, both tradelines show a zero balance, but the Equifax tradeline arguably reflects a payment status of at least 120 days past due as of November 2020.
Many courts have found that reporting historical account data is neither inaccurate nor misleading. See e.g., Jones v. Equifax Info. Servs., 2019 WL 5872516 (M.D. Tenn. Aug. 8, 2019) (finding that a credit report showing a monthly payment obligation when the account was closed and had a zero-dollar balance was not materially misleading because “a reasonable prospective lender would understand [that] the report showed a past obligation only”); Thomas v. Equifax Info. Servs., LLC, 2020 WL 1987949, (S.D. Ohio Apr. 27, 2020) (finding no reasonable person would be misled into believing that plaintiff had any ongoing monthly obligation on this installment loan when the account was reported closed with a zero-dollar balance); Euring v. Equifax Information Servs., LLC, 2020 WL 1508344 (E.D. Mich. Mar. 30, 2020) (finding nothing false or materially misleading about the “monthly payment” information on plaintiff's credit reports in light of the other information that appears on those reports).
Other courts have found the reporting of past due status could allege an FCRA claim where the loan although previously past due has been fully paid-off by the creditor. See, e.g., Settles, 2020 WL 6900302 at *5 (noting Macik v. JP Morgan Chase Bank, 2015 WL 12999728 (S.D. Tex. May 28, 2015), report and recommendation adopted, 2015 WL 12999727 (S.D. Tex. Jul. 31, 2015) (plaintiff fell behind on mortgage payments, sold the house, and paid off loan, but pay status still reported as 90 days past due with a zero balance). The Settles Court determined such circumstances materially differ from a default situation like the one facing plaintiff:
See also, Soler v. Trans Union, LLC, 2020 WL 7237256, (C.D. Cal. Dec. 1, 2020) (Accounts closed with a $0 balance after full satisfaction still reported the past delinquent statis arguably inaccurate where “past status” not definitively defined on the credit report.).
Unlike the circumstances in this case, the Macik plaintiff paid the loan in full before the account was closed. Accordingly, a report that was misleading in Macik, is not necessarily misleading here where Plaintiff did not pay his loan in full - he defaulted. In both cases the reported loan balance is zero-dollars. In both cases, the loan account was closed. However, the difference between a loan paid in full by the borrow and one in default is not insignificant. Though Plaintiff argues otherwise, the fact that his account was paid via a government insurance policy after he defaulted on the loan, does not equate his zero-balance to the Macik plaintiff's zerobalance.Settles, 2020 WL 6900302, at *5; but see Mund v. TransUnion, 2019 WL 955033, at *3 (E.D.N.Y. Feb. 27, 2019) (report arguably misleading where it indicates that the 120-day delinquency occurred in October 2013 and October 2015 even though further clarified by the line entry explaining that plaintiff's loan was transferred to another lender and closed on October 27, 2015 with a $0 balance).
Nonetheless, Settles impliedly recognizes the continued reporting of a past due payments status when an account has a zero balance can be misleading.
Here plaintiff asserts the tradelines show patently incorrect payment status. Reading the tradelines documents as a whole, the Court cannot conclude that the complaint plausibly alleges patently incorrect payment status as both tradelines show the account closed with a zero balance. Nonetheless, they are arguably misleading.
In asserting their reporting was not misleading, FedLoan relies on Bibbs v. Trans Union LLC, 2021 WL 695112, at *1 (E.D. Pa. Feb. 23, 2021) where the court determined:
But we must read the entire report mindful Congress does not require Trans Union provide an encyclopedic explanation of her obligation to the creditor; a credit report instead offers a snapshot which must be accurate or not mislead a creditor based on the entirety of investigated and reported data. All parties concede Navient transferred her overdue debt on the date reported, closed her obligation, and reported her as paying 120 days past due. This is patently accurate. It is not misleading. We grant Trans Union's Motion for judgment on the pleadings and deny Ms. Bibbs's cross-Motion because Trans Union accurately represents her obligation as of the date Navient closed and transferred her debt. There is no dispute she owed nothing more to Navient upon transfer and her obligations had been 120 days past due at time of transfer.
But as noted above, the Equifax tradeline reasonably indicates the account is more than 120 days past due as of November 2020. This entry is plausibly misleading despite the report of a zero balance and the fact that plaintiff defaulted on the loan and it was transferred to a guarantor. At this stage of the proceedings, especially given the apparent lack of any actual report FedLoan made to the CRAs, it is wiser to allow a trier of fact to determine whether such report is misleading when the record is more fully developed. While a trier of fact could conclude that the continued report of the delinquency is not misleading, the Court should be reluctant to make such a finding at the pleading stage. Accordingly, the motion for judgment on the pleadings should be denied.
CONCLUSION
Defendant FedLoan's motion for judgment on the pleadings (ECF 20) should be denied.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.