Court: District Court, N.D. Georgia; March 19, 2019; Federal District Court
Plaintiff initiated this action under the Fair Credit Reporting Act (FCRA) against defendants Ocwen Loan Servicing, LLC, Equifax Information Services, LLC, and TransUnion, LLC, alleging inaccurate information on his credit report. Specifically, the plaintiff claims that Ocwen incorrectly reported a mortgage delinquency related to a loan from Deutsche Bank National Trust Company, which should have been removed from his credit report by June 2015. The dispute stems from a foreclosure lawsuit initiated by Deutsche Bank in 2006, alleging non-payment starting in May 2008.
Despite disputing the inaccuracies with Equifax and TransUnion in late 2017 and early 2018, the plaintiff asserts that Ocwen failed to conduct a reasonable investigation and continued to report false information, resulting in a decline in his credit score and hindering his ability to secure mortgage pre-approval in 2018.
Ocwen moved to dismiss the claims against it, with a magistrate judge recommending partial dismissal: granting Ocwen's motion regarding the "permissible purpose" claim under 15 U.S.C. § 1681b but denying dismissal concerning the plaintiff's claim under § 1681s-2(b). Ocwen objected to the latter recommendation, arguing that only credit reporting agencies can be liable for reporting delinquencies over seven years old, that exceptions to the seven-year rule apply, and that the aging period was not triggered due to the loan's status.
To challenge the magistrate judge's findings, objections must be specific and filed timely, prompting the district court to conduct a de novo review of the contested aspects.
Ocwen's motion to dismiss has been partially granted and partially denied, as per the magistrate judge's recommendation. The court will conduct a de novo review of the findings to which objections have been made and may accept, reject, or modify the recommendations. Under Rule 12(b)(6), a complaint must present sufficient factual allegations to establish a plausible claim for relief, requiring more than mere labels or conclusory statements. The court must assume the truth of the allegations and interpret them favorably for the plaintiff.
The magistrate judge recommended denying the motion to dismiss related to the plaintiff's claim against Ocwen under 15 U.S.C. § 1681s-2(b). Ocwen contends that it, as a furnisher, is not obligated to remove "aged-out" accounts under § 1681c(a), which applies to consumer reporting agencies (CRAs). However, the magistrate judge concluded that § 1681s-2(b) imposes an obligation on furnishers like Ocwen to investigate and correct disputed information. The duty includes assessing whether a mortgage delinquency should have been removed from a consumer report. Other courts have similarly found furnishers liable under comparable circumstances.
The plaintiff has claimed that Ocwen inaccurately reported a loan account as delinquent and has adequately alleged the necessary elements for a claim under § 1681s-2(b), which requires showing that the furnisher received notice of a dispute from a CRA and failed to conduct a reasonable investigation or correct inaccurate information.
The plaintiff has alleged that Ocwen failed to conduct a reasonable investigation after being notified of disputed information regarding the accuracy of a mortgage account on his credit report. Specifically, the plaintiff claims Ocwen did not review its records about the first delinquency date and thus allowed an inaccurate account to remain on consumer reports, violating 15 U.S.C. § 1681s-2(b). Ocwen contends that the account was appropriately reported due to an exception allowing the reporting of accounts delinquent for over seven years when connected to transactions over $150,000. However, the magistrate judge found insufficient evidence that the loans in question met the $150,000 threshold, maintaining that Ocwen still had a duty to investigate the disputed inaccuracies. Furthermore, Ocwen argued the loan had not aged off reporting because it was not "placed for collection" or charged off within the seven-year period. The court reiterated that delinquent loans, regardless of their collection status, are subject to the aging off rule under 15 U.S.C. § 1681c(b)(1), which states that no adverse information can be reported if it predates the report by more than seven years. Given the alleged first delinquency in May 2008 and the reporting starting in November 2017, the plaintiff's mortgage should have aged off the reports. Consequently, the court overruled Ocwen's objections, adopted the magistrate judge's report and recommendation, and recommended that Ocwen’s Motion to Dismiss be granted in part and denied in part, while denying the plaintiff’s Motion for Leave to File Surreply. The ruling was issued on March 19, 2019.
Plaintiff accuses Defendants Ocwen, Equifax Information Services, and TransUnion of violating the Fair Credit Reporting Act (FCRA) through intentional and negligent reporting errors related to a mortgage on a property in Florida. Ocwen serviced the mortgage, which Plaintiff defaulted on in April 2008. Plaintiff asserts that the mortgage should have been removed from his credit reports by June 2015, following the seven-year period post-first delinquency.
Deutsche Bank initiated foreclosure proceedings against Plaintiff in October 2008, claiming non-payment since May 2008. In December 2014, Plaintiff settled with Deutsche Bank, consenting to foreclosure and waiving objections to the sale, in exchange for the bank not pursuing a deficiency judgment.
In April 2018, Ocwen filed another foreclosure lawsuit, alleging a default beginning May 1, 2013, while reporting to credit bureaus that Plaintiff's delinquency began in October 2012. Equifax's reports from August 2014 indicated the mortgage's last activity as June 2008, but the mortgage did not appear in subsequent reports from 2016 and 2017.
The first reported inaccuracy by Equifax was noted in November 2017, showing the mortgage account open with a balance of $141,868 and a payment status of "pays account as agreed," despite Plaintiff not making payments since April 2008. Equifax inaccurately indicated Plaintiff was 120 days late on several occasions between November 2015 and August 2017, contradicting the 2014 Settlement Stipulation, which negated any payment obligations. Plaintiff highlights inconsistencies in the payment history and asserts that Equifax failed to investigate these inaccuracies before reporting, despite having knowledge of the foreclosure. This pattern of reporting continued in a November 2017 credit report.
On November 20, 2017, the Plaintiff disputed an account with Equifax, asserting it should be removed due to no payments since April 2008. Equifax allegedly forwarded this dispute to Ocwen, which failed to conduct a reasonable investigation, not checking payment records or foreclosure information, and subsequently confirmed the account's accuracy. In December 2017, Equifax informed the Plaintiff that the account belonged to him based on additional information but did not provide documentation supporting this verification. The updated consumer report sent by Equifax inaccurately reflected September 2017 as the "date of last activity."
The Plaintiff submitted a second dispute on January 8, 2018, reiterating the lack of payments since April 2008 and noting that the reappearance of the account might be linked to a National Disaster Area declaration, which halted negative credit reporting in Brevard County. Again, Ocwen reportedly did not conduct a thorough investigation, confirming the account's accuracy without addressing the Plaintiff's concerns. Equifax responded similarly, verifying the account based on original source information without addressing the specific reasons for the dispute. The updated report from Equifax showed February 2017 as the "date of last activity," contradicting earlier reports.
In April 2018, Equifax altered the account's "Payment Status" from "Paid or Paying as Agreed" to "Late," increasing the past due amount to $69,227 and causing the Plaintiff's credit score to drop from 747 to 685. Additionally, the Plaintiff's credit reports from TransUnion obtained in late 2017 did not initially include any information about the mortgage. An inaccuracy was later identified in a report from TransUnion on November 19, 2017, showing the Ocwen Loan Servicing account with a balance of $141,868 and a status of "Paid or Paying as Agreed."
TransUnion reported a 24-month payment history for the Plaintiff's mortgage account indicating "ND" (no data) for several months in 2016, despite the Plaintiff not having made any payments since April 2008, rendering the report inaccurate. Additionally, TransUnion inaccurately recorded the account as being 120 days late during multiple months from November 2015 through August 2017, contradicting the Plaintiff's claim that no payments were owed following a 2014 Settlement Stipulation. The discrepancies included simultaneous reporting of "ND" and being 120 days late within the same year. Plaintiff alleges that TransUnion failed to investigate these inaccuracies, ignoring internal inconsistencies and prior contradictory information.
After sending a dispute letter on November 21, 2017, asserting that the account should not be reported, Plaintiff claims TransUnion forwarded the dispute to Ocwen, which conducted an inadequate investigation and inaccurately reported the account as correct. A subsequent reinvestigation by TransUnion in December 2017 falsely updated the account status to current for late 2017.
On January 5, 2018, Plaintiff submitted another dispute regarding the account's age and its potential erroneous reporting due to a disaster declaration affecting the area. He alleges that Ocwen again failed to conduct a reasonable investigation, leading to TransUnion reporting the account as verified accurate on January 30, 2018, without considering pertinent evidence.
Finally, in April 2018, TransUnion changed the account's status from "Paid or Paying as Agreed" to "Late," resulting in a significant drop in the Plaintiff's credit score from 731 to 669.
Ocwen obtained a consumer report on Plaintiff from Experian on December 1, 2017, which Plaintiff alleges was without permissible purpose, violating the Fair Credit Reporting Act (FCRA). Plaintiff claims damages including credit denials, lost opportunities for credit, economic loss, reputational harm, reduced credit score, emotional distress, and interference with daily activities. He specifically notes that he was unable to secure mortgage preapproval in 2018 due to the Ocwen tradeline on his reports and experienced severe anxiety prompting therapy.
In its Motion to Dismiss, Ocwen argues that Plaintiff, as a real estate investor, is not entitled to FCRA protections and contends that its role as Plaintiff's mortgage servicer justifies its actions under Section 1681b. Ocwen asserts that the dispute should fall under Section 1681c, which pertains to consumer reporting agencies, and that the tradeline is permissible because it involves a principal amount exceeding $150,000.
Plaintiff counters that he has adequately pleaded a claim under Section 1681s-2(b), asserting he did not have an account with Ocwen at the time of the report due to a Settlement Stipulation. He argues that his status as a real estate investor does not negate his FCRA claims and that Ocwen's position is based on assumptions not supported by the Complaint. Furthermore, he maintains that even if the mortgage account could appear on his report, Ocwen is still obligated to investigate and remove inaccurate information under Section 1681s-2(b).
Ocwen responds by disputing the interpretation of the Settlement Stipulation and argues that without factual inaccuracies, Plaintiff's Section 1681s-2(b) claim should be dismissed. It also claims that accessing a credit report to ensure accurate reporting of an existing account is permissible and asserts that Plaintiff failed to plead a non-commercial purpose for seeking credit under the FCRA.
The legal standard for dismissal under Rule 12(b)(6) requires that, even assuming the truth of Plaintiff's allegations, a legal issue exists that precludes relief or that the claim is based on an indisputably meritless legal theory.
A Rule 12(b)(6) motion tests the sufficiency of a complaint against the standard outlined in Rule 8, which requires a short and plain statement of the claim demonstrating entitlement to relief. The Supreme Court's decision in Bell Atlantic Corp. v. Twombly emphasizes that mere labels or formulaic recitation of elements is insufficient; instead, the complaint must include enough factual matter to suggest the required elements when taken as true. The complaint's allegations must elevate the right to relief above a speculative level, as established in Twombly and supported by Swierkiewicz v. Sorema N.A.
In the case involving Ocwen, the issue arises regarding the applicability of the Fair Credit Reporting Act (FCRA) to credit reports obtained for business purposes. Ocwen claims that the plaintiff, identified as a real estate investor with multiple properties in Florida, did not clarify whether the mortgage sought was for personal or investment use. The plaintiff cites Yang v. Government Employees Insurance Co. to argue that the term "consumer report" includes any report for evaluating creditworthiness, thus questioning Ocwen's assumption about the commercial nature of the reports.
Ocwen contends that the plaintiff has not sufficiently alleged that the credit reports were obtained for non-commercial purposes. However, it is noted that even if the reports were not classified as "consumer reports" under the FCRA, it would not warrant dismissal of the claims, only affect the calculation of actual damages resulting from credit denials. Actual damages are not required to establish a prima facie case of willful FCRA noncompliance, as per Levine v. World Financial Network National Bank. While actual damages are necessary for negligent noncompliance claims, the plaintiff alleges additional damages beyond the denials, including emotional distress resulting in anxiety and panic attacks, for which courts in the district have recognized emotional distress as a form of actual damages under the FCRA.
In Moore v. Equifax Info. Servs. LLC, the court held that damages for mental distress are recoverable under the Fair Credit Reporting Act (FCRA) without the necessity of out-of-pocket losses. Although the Eleventh Circuit did not address this directly, it recognized that emotional harm can support actual damages claims under the FCRA, aligning with findings from other circuits. The court indicated that even if the defendant's arguments were valid, they would not warrant dismissal of the plaintiff's claims at this stage.
The defendants argued that the plaintiff sought credit reports for commercial purposes, a claim not substantiated by the plaintiff's complaint, which detailed the plaintiff's attempts to purchase a home in 2018 and subsequent loan denials linked to a problematic credit report from Ocwen. Ocwen's claims about the plaintiff's real estate investments are not included in the original complaint. The court emphasized that all allegations must be viewed favorably for the plaintiff during a motion to dismiss and stated it would not convert the motion to one for summary judgment to consider these extraneous allegations.
The ruling clarified that whether the reports obtained by Caliber and Fairway were classified as "consumer reports" under the FCRA requires further factual inquiry, based on the use and purpose of the reports as defined in relevant case law. The court recommended denying the motion to dismiss regarding the argument that the credit denials did not relate to consumer reports.
Regarding the plaintiff's claim against Ocwen for not having a permissible purpose to access his credit report, the court noted Ocwen's defense that it was authorized as the servicer of the mortgage loan. They argued that a settlement did not eliminate the debt but confirmed its enforceability, distinguishing between waiving a deficiency balance and eliminating the debt entirely.
Plaintiff's mortgage remains active as it has not been foreclosed, leading Ocwen to continue servicing the delinquent account. Ocwen claims it accessed Plaintiff's credit report for permissible purposes under the Fair Credit Reporting Act (FCRA), specifically for account review and collection. Plaintiff counters that Ocwen improperly obtained his credit report, referencing a similar case, Ruk v. Crown Asset Mgmt. LLC, where the court allowed a claim to proceed based on allegations of no existing account due to bankruptcy discharge. Plaintiff asserts he had no account with Ocwen at the time of the credit report acquisition and provides evidence that supports this claim, including a lack of payments since April 2008 and a Settlement Stipulation that absolved him of any debt. He argues that Ocwen's justification for accessing his report is insufficient, as it did not pertain to a business transaction initiated by him, nor did it relate to an existing account. In response, Ocwen maintains that the debt exists regardless of payment history and that the Settlement Stipulation did not eliminate the debt or their creditor relationship, which would persist until foreclosure. Ocwen also argues it can access credit reports to confirm accuracy for closed accounts and distinguishes the Ruk case by noting that mortgage liens remain in effect even if personal liability is discharged in bankruptcy.
An Eleventh Circuit case, Levine, indicates that the holder of a closed account who obtains a credit report does not commit a willful violation under the Fair Credit Reporting Act (FCRA). The FCRA prohibits obtaining a consumer report without a permissible purpose, requiring proof of four elements: (i) existence of a consumer report, (ii) that the defendant obtained it, (iii) absence of a permissible statutory purpose for obtaining it, and (iv) the defendant's culpable mental state. Ocwen argues for dismissal based on the third prong, asserting it had the right to obtain Plaintiff's credit report as Plaintiff's servicer and that confirming accurate reporting constitutes a permissible purpose. The law is ambiguous regarding whether a former creditor can access a credit report after an account is closed.
Plaintiff acknowledges lack of payment since 2008, but disputes whether the debt has been satisfied. No foreclosure had occurred as of December 1, 2017, and the debt's existence is tied to a Settlement Stipulation from December 2014 between Deutsche Bank and Plaintiff, resolving a foreclosure lawsuit from 2008. The stipulation confirms the mortgage note as valid and enforceable, with Plaintiff waiving defenses to Deutsche Bank's complaint and consenting to a final judgment of foreclosure. In exchange, Deutsche Bank agreed to accept the property or proceeds from a foreclosure sale as full satisfaction of the debt, without pursuing a deficiency judgment. The stipulation does not imply full cancellation of the mortgage loan but suggests forgiveness of any remaining amounts after foreclosure.
Deutsche Bank's commitment not to seek a deficiency judgment is contingent upon the occurrence of a foreclosure sale, which has not yet happened. A deficiency judgment represents the remaining balance owed after selling the mortgaged property, and requires a final foreclosure judgment, property sale, and certificate of title issuance. Without a foreclosure sale, Deutsche Bank's waiver of deficiency claims is not applicable. Similarly, Ocwen's agreement not to pursue claims on the promissory note does not eliminate the mortgage debt; it merely limits the recourse available upon borrower default. The mortgage lien remained on the property as of December 1, 2017, and if payments were not made, Deutsche Bank could still foreclose without seeking to enforce the promissory note. This situation is comparable to a bankruptcy discharge, where a debtor may not be personally liable for the mortgage debt, but the lender retains the lien on the property. Even post-discharge, the lender can still review the borrower's credit report, maintaining the relationship despite the discharge. Courts have affirmed that a mortgage debt discharge does not extinguish the lender's rights to monitor the account or obtain consumer reports.
Ocwen, as the servicer of Plaintiff's mortgage loan, is evaluated in the context of its status as a current creditor regarding the permissible purpose of obtaining Plaintiff's credit report. Although the Complaint does not explicitly state the alleged impermissible purpose, Plaintiff infers that Ocwen's acquisition of the credit report was to investigate his dispute, based on the timing—nine or ten days after Plaintiff sent dispute letters to credit bureaus. The Court acknowledges this proximity as a plausible indication of Ocwen's motive for obtaining the report, necessitating a legal determination on whether this purpose was permissible.
Plaintiff contends that obtaining credit reports in response to dispute letters is impermissible but offers no supporting authority. In contrast, Ocwen references relevant case law, including a Fifth Circuit decision affirming the legitimacy of a former creditor obtaining a credit report to verify adverse notations post-settlement. Other cases support a creditor's right to access consumer reports when facing litigation or disputes, establishing a "legitimate business need."
The Court concludes that even if Plaintiff's assertions are accurate, they do not substantiate a Fair Credit Reporting Act (FCRA) violation under 15 U.S.C. § 1681b. Acquiring a credit report following notification of reporting errors is deemed permissible, as Ocwen has a legitimate interest in ensuring accurate credit reporting to mitigate potential liability under the FCRA. If an error is identified, Ocwen is obligated to notify other credit reporting agencies of any necessary corrections.
Ocwen had a legitimate business reason for investigating Plaintiff's account to ensure accurate reporting across major credit agencies, particularly given the Plaintiff's long-standing debt nonpayment, which justifies collection efforts under the Fair Credit Reporting Act (FCRA). Although Plaintiff claimed Ocwen lacked permissible purpose for obtaining his credit report, this assertion alone does not constitute a valid claim. Various case precedents support the view that allegations of no business dealings with a creditor are insufficient to establish a violation under Section 1681b of the FCRA. The justification for Ocwen's report acquisition—responding to Plaintiff's disputes—falls within permissible purposes outlined in the statute. Consequently, the Court recommends granting Ocwen's motion to dismiss the Section 1681b claim.
Regarding Plaintiff's FCRA Section 1681s-2(b) claim, Ocwen did not address this in its dismissal motion, and the Complaint lacks clarity on specific allegations against each Defendant. Plaintiff vaguely cites negligent and intentional FCRA violations without detailing specific statutory breaches, except for a footnote referencing Section 1681s-2(b). In his Reply, Plaintiff argues a valid claim exists based on prior authorities concerning furnishers' liability for inaccurately reporting on obsolete accounts after receiving disputes. However, Ocwen contends that Plaintiff failed to allege factual inaccuracies in its reporting and that his claims misinterpret the mortgage terms and a deficiency waiver. Ocwen asserts that legal interpretations do not constitute factual inaccuracies required for an FCRA claim. Under FCRA, furnishers must investigate disputes and review relevant information provided by credit reporting agencies.
In a dispute regarding the accuracy of credit reporting, a furnisher of information must conduct a reasonable investigation into alleged inaccuracies and report the findings to credit reporting agencies (CRAs). If the investigation reveals that the information is inaccurate, incomplete, or unverifiable, the furnisher is required to promptly modify, delete, or block the reporting of that information. The case Hinkle v. Midland Credit Management establishes that a claim under Section 1681s-2(b) cannot proceed without credible allegations of inaccuracy. The plaintiff claims inaccuracies related to the reporting of a mortgage account, arguing it was improperly re-aged and should not be reported since the initial delinquency occurred over seven years ago. The court previously dismissed the argument that the Settlement Stipulation nullified the plaintiff's obligation to make payments. Although Ocwen acknowledges the mortgage account should have been removed after seven years, it contends that it is not liable for re-aging claims as Section 1981c is applicable only to CRAs. However, the plaintiff alleges that Ocwen may have inaccurately reported the delinquency date, which could have caused the account to reappear on the credit report. The plaintiff's disputes indicate that the account had not been paid since 2008, warranting its removal from the credit report. The court allows the plaintiff to bring a claim under Section 1681s-2(b) for failing to correct the reporting error. Additionally, Ocwen argues that the mortgage can be included in the consumer report under 15 U.S.C. 1681c because it involves a principal balance exceeding $150,000.
Section 1681(c)(b)(1) outlines exemptions for Consumer Reporting Agencies (CRAs) regarding the removal of obsolete accounts, specifically for consumer reports related to credit transactions of $150,000 or more. However, the plaintiff's claim against Ocwen is grounded in Section 1681s-2(b), not Section 1681c. Even assuming the report was for a transaction exceeding $150,000, this does not absolve Ocwen of liability for failing to investigate a disputed inaccuracy. The Court recommends denying Ocwen's Motion to Dismiss concerning the Section 1681s-2(b) claim.
The plaintiff also seeks permission to file a surreply to address Ocwen's arguments related to Section 1681s-2(b) and claims of factual inaccuracies. The Court notes that Ocwen did not initially address the Section 1681s-2(b) claim due to unclear allegations in the complaint. Despite this, the plaintiff's responsive brief sufficiently outlined the claim. The Court finds no need for further briefing and denies the motion for a surreply.
In conclusion, the Court recommends granting in part and denying in part Ocwen's Motion to Dismiss and denies the plaintiff's Motion to File Surreply. The Court conducts a de novo review of Ocwen's objections to the Report and Recommendation (R. R.) and assumes the truth of the facts alleged in the complaint. General objections by Ocwen regarding the motion to dismiss are not considered valid. The Court will also evaluate the Settlement Stipulation attached to the complaint as it is central to the claims and judicially notice the relevant public record. The Court finds the interpretation of this case unlikely and notes the plaintiff's acknowledgment of Ocwen's foreclosure lawsuit against him in April 2018.
