Court: District Court, D. Maryland; March 18, 2019; Federal District Court
Plaintiff Crystal Long has filed a consumer protection lawsuit against Pendrick Capital Partners II and Ability Recovery Services, LLC, asserting violations of the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), common-law defamation, the Maryland Consumer Debt Collection Act (MCDCA), and the Maryland Consumer Protection Act (MCPA). The Court is reviewing Plaintiff's Partial Motion for Summary Judgment on her FCRA and FDCPA claims, along with the Defendants' cross motions for summary judgment on all claims, with no hearing required.
Pendrick, a debt buyer, acquired a medical debt from EmCare-Randall Emergency Physicians attributed to a Crystal Long residing at 5126 Sekots Road, Baltimore, Maryland. Pendrick assigned the debt to Ability for collection, which involved two accounts: one for $1,125 and another for $74. Ability utilized skip tracing to link the EmCare debt to Plaintiff, who actually lives at 12704 Fairwood Parkway in Bowie, Maryland, and is not liable for the debt despite sharing the same name with the debtor.
Plaintiff’s personal details, including her birthdate and Social Security number, differ from those of the debtor. She has never received services from EmCare nor worked at the Department of Corrections. On November 14, 2016, Ability sent initial collection letters to Plaintiff regarding the two accounts, detailing her rights to dispute the debt within 30 days. The Court's decisions will partially grant and deny both Plaintiff's and Defendants' motions for summary judgment.
Letters from Ability indicated that they would report the unresolved debt to a credit reporting agency. On November 22, 2016, within thirty days of receiving the letters, the Plaintiff contacted Ability to dispute the validity of a $1,125 EmCare debt. During the call, Ability employee Mark Carlson explained the debt was for emergency room services from August 2014, and asked if the birthdate on file matched the Plaintiff's. The Plaintiff denied recognition of the debt and stated that the birthdate was incorrect. Carlson suggested the Plaintiff dispute the debt with the credit bureau, stating that Ability would mark the account as disputed. However, he also indicated that Ability would report the debt to the credit reporting agencies despite the discrepancies and that the Plaintiff's only recourse was to dispute it after reporting. Carlson emphasized the role of the credit reporting agencies in identifying potential errors, suggesting that disputes should be handled through them rather than through Ability. He did not inform the Plaintiff of a requirement for a written dispute or that she could request validation of the debts. At his deposition, Carlson acknowledged he lacked the authority to determine debt validity.
Ability's corporate representative confirmed that the company automatically uploads provided information to credit reporting agencies (CRAs), which then match it with consumer records. Following a phone call on November 22, 2016, Ability updated its records to note that the Plaintiff disputed a debt. Despite this, after the thirty-day period from the initial collection letters, Ability reported the disputed debt to the CRAs. On December 17, 2016, the Plaintiff received a notification of new derogatory information on her credit report, indicating delinquency on a $1,125 debt from Ability. Although she had received collection letters for two accounts related to the EmCare debt, only one appeared on her report. The same day, she disputed the debt via Equifax's online protocol, highlighting discrepancies in her identification details and asserting that the debt was incorrectly attributed to her.
Equifax subsequently sought verification from Ability, sending an automated consumer dispute verification (ACDV) that noted the Plaintiff's dispute and requested complete identification, including her Social Security number and birthdate, which did not match Ability's records. Despite this mismatch, Ability verified the account as belonging to the Plaintiff. On December 28, 2017, Equifax reported the results of its reinvestigation, which did not remove the derogatory tradeline. On January 31, 2017, the Plaintiff sent dispute letters to Experian, Equifax, and TransUnion, reiterating her claims. Equifax contacted Ability, which again confirmed the account's accuracy. Experian also sent a dispute request to Ability, which similarly verified the information. The derogatory tradeline remained on the Plaintiff's credit report despite multiple disputes. Subsequent disputes sent on May 5, 2017, were also met with verification from Ability. Throughout this process, Ability did not engage with the Plaintiff or Pendrick for further information, relying solely on existing account details for its reinvestigation.
Plaintiff's account was marked as disputed by Ability's system, but it did not specifically indicate her claims of never receiving services from EmCare or discrepancies in her birthdate and Social Security number. While Plaintiff provided her birthdate and Social Security number in disputes to Credit Reporting Agencies (CRAs), she did not submit this information to Ability, which led to her account remaining in a disputed status. Plaintiff holds a significant financial position at Trust Health Plans, where she oversees accounting staff and manages substantial financial transactions. She had signed a consent form allowing her employer to check her credit prior to her employment starting in September 2016. It is unclear if this consent was utilized to check her credit during her employment, especially when a derogatory tradeline appeared on her report.
Plaintiff became aware of the inaccurate information affecting her credit report, which hindered her job prospects due to the industry's trust requirements. Notably, after a potential employer required access to her credit report in May 2017 and subsequently did not hire her, she delayed further job applications. Following the removal of the derogatory tradeline after filing this lawsuit, Plaintiff received two promotions in mid-2017. Although she noted an increase in the interest rate on one of her credit cards, the connection to the inaccurate credit report information is disputed, and it is unclear when this increase occurred. She refrained from applying for new credit, fearing potential denials, which included a desire to finance a new car. Additionally, Plaintiff experienced emotional distress manifesting as sleep loss, headaches, and anxiety due to the inaccurate information on her credit report. She filed a lawsuit on May 19, 2017, against Defendants Pendrick, Ability, Equifax, and Experian, alleging multiple claims under FCRA, FDCPA, MCDCA, MCPA, common law defamation, and seeking declaratory judgment. An amended complaint was filed on June 12, 2017, before the case was removed to federal court.
In June 2017, following the initiation of the lawsuit by the Plaintiff, Ability requested the credit reporting agencies (CRAs) to delete tradeline information associated with the EmCare debt, despite having the same information about the Plaintiff's dispute as when it previously verified the accounts. The Plaintiff filed a Partial Motion for Summary Judgment concerning Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA) claims, while the Defendants countered with Cross Motions for Summary Judgment on all claims and opposed the Plaintiff's motion. The standard for summary judgment requires no genuine dispute of material fact and that the moving party is entitled to judgment as a matter of law. A material fact is defined as one that could influence the suit's outcome under applicable law, and a genuine dispute exists only if sufficient evidence favors the non-moving party. The Court is obligated to prevent unsupported claims from proceeding and must consider each party’s motion for summary judgment separately. In terms of FCRA violations, the Plaintiff alleges Ability failed to conduct a reasonable investigation and reported inaccurate information after receiving her disputes. The FCRA, enacted in 1970, aims to ensure fair credit reporting and allows individuals to sue information furnishers for violations. Under 15 U.S.C. 1681s-2(b), once notified of a dispute, furnishers must investigate and report the findings to the CRAs.
Congress intended for furnishers of credit information to review reports for both inaccuracies and omissions that could mislead consumers. Under the Fair Credit Reporting Act (FCRA), a credit report is deemed inaccurate if it creates a materially misleading impression, as established in Saunders v. Branch Banking, Trust Co. For a plaintiff to succeed in obtaining summary judgment against a furnisher for non-compliance with the investigation requirement in 15 U.S.C. § 1681s-2(b)(1)(A), they must demonstrate that they notified a credit reporting agency (CRA) of the disputed information, that the CRA informed the furnisher of the dispute, and that the furnisher failed to conduct a reasonable investigation or modify the inaccurate information.
In the present case, the plaintiff notified the CRAs of her disputes through letters sent on multiple occasions, and it is undisputed that the CRAs communicated these disputes to the defendant, Ability, via Automated Consumer Dispute Verifications (ACDVs). However, there is disagreement regarding whether Ability conducted a reasonable investigation and whether the plaintiff experienced actual damages or if any failure to investigate was willful.
The court emphasizes that a reasonable investigation requires a detailed inquiry, not superficial or unreasonable efforts. Citing Johnson, the court notes that mere internal file reviews do not satisfy FCRA obligations. In Wood v. Credit One Bank, the court found a furnisher liable for failing to conduct a reasonable investigation when it only compared personal information on disputes with its records without contacting the consumer. The court concluded that only definitive evidence, such as a police report or affidavit, could substantiate the claim of fraudulent account opening.
The court determined that the defendant failed to conduct a thorough investigation into claims of a fraudulently opened account in the consumer's name, as evidenced by a lack of careful inquiry into the consumer's personal identifiers. The court found it unreasonable for the defendant to rely solely on matching identifiers associated with the account while ignoring the consumer's ongoing disputes. Furthermore, the defendant was held liable for reporting materially misleading information to Credit Reporting Agencies (CRAs), violating the Fair Credit Reporting Act (FCRA). The defendant verified the disputed debt as "resolved," not indicating the consumer's responsibility for the debt but merely that an investigation had been completed.
In the present case, the evidence showed that Defendant Ability conducted only a superficial investigation into the Plaintiff's disputes, similar to the defendant in Wood. Ability matched the personal information on the Account Correction Data Verification (ACDV) forms with its records, despite discrepancies in the Social Security number, birthdate, and address. Instead of verifying the debt based on accurate comparisons, Ability relied on a match of names and a skip-traced address. The investigation did not include contacting the Plaintiff or the creditor, which would have clarified that the Plaintiff lived at a different address than the debtor and had never worked at the Department of Corrections.
Ability's claim that the Plaintiff did not provide sufficient information to prove non-responsibility was dismissed as meritless, given that Ability lacked a clear policy for determining consumer responsibility for debts. A representative admitted during a call with the Plaintiff that he could not assess whether the consumer was responsible for the debt and failed to guide the Plaintiff on what further information could be provided. Instead, he repeatedly directed the Plaintiff to dispute the debt with the CRAs, reflecting a lack of proper procedures within Ability for handling such disputes.
When a consumer disputes a debt, Ability ceases communication unless further information is provided, failing to request debt deletion from credit reporting agencies (CRAs). Ability uploads creditor information to CRAs without independently determining debt validity. The plaintiff needed to file a lawsuit for Ability to recognize her non-responsibility for the debt. Ability allegedly violated its obligation to report investigation results accurately by continuously verifying the disputed debt despite discrepancies in personal information. This verification was misleading, given signs that the plaintiff was not liable for the debt. Ability is accused of negligently violating the Fair Credit Reporting Act (FCRA), warranting summary judgment for the plaintiff on liability, independent of evidence for actual damages. A plaintiff can establish FCRA liability even if damages remain contested. Actual damages can encompass economic loss, humiliation, and mental distress, with emotional distress claims supported by plaintiff testimony. The plaintiff felt deterred from job opportunities due to inaccuracies on her credit report, particularly after a potential employer accessed her report and did not hire her. Although Ability noted the plaintiff’s recent promotions, these occurred post-lawsuit and after the debt removal, and do not negate her claims of harm. The plaintiff also withdrew from the credit market, fearing credit denial, and reported emotional distress symptoms linked to the inaccurate credit information.
Defendant Ability contends that Plaintiff's claims of emotional distress are merely conclusory; however, it is reasonable to infer that Plaintiff experienced significant frustration, distress, and anxiety due to the difficulties in removing an inaccurate tradeline from her credit report, particularly given her professional emphasis on financial reputation. Plaintiff's distress may have been exacerbated by her awareness of having authorized her employer to access her credit report, despite not proving that the employer actually reviewed it. Defendant argues that Plaintiff initially deemed the tradeline issue minor, but this belief does not negate her claim of harm. In fact, her expectation that the inaccuracies would be easily resolved turned out to be unfounded, as her complaint was inadequately addressed until she filed a lawsuit, prompting Ability to act. Regardless of the perceived magnitude of her injury, if Plaintiff suffered actual harm due to Ability's negligence, she is entitled to recover damages under the Fair Credit Reporting Act (FCRA) provisions.
A genuine dispute exists regarding whether Ability acted willfully in violating the FCRA, as willfulness encompasses both knowing and reckless violations. Courts typically treat willfulness as a factual question for the jury, focusing on the defendant's state of mind. Plaintiff has presented evidence suggesting that Ability should have recognized her lack of obligation for the disputed debt, whereas Defendant argues that any failure to act was due to carelessness, not recklessness. Notably, while Plaintiff disputed the debt verbally, she did not submit a written dispute, which may mitigate the perception of willfulness in Defendant's actions. Furthermore, there is evidence that Ability's representatives may not have understood their duty to determine the validity of the debt in question. Consequently, both parties' motions for summary judgment regarding Plaintiff's FCRA willfulness claim are denied due to these material disputes.
Mark Carlson testified that he lacked the authority to determine if a consumer owed a debt and was uncertain who at Ability held that power. This ambiguity could lead a jury to conclude that Ability's employees did not willfully violate the Fair Credit Reporting Act (FCRA). Consequently, the motions for summary judgment from both the Plaintiff and Defendant Ability regarding the alleged willful FCRA violation are denied due to ongoing genuine disputes of material fact.
Regarding the Fair Debt Collection Practices Act (FDCPA), the Act aims to eliminate abusive debt collection practices and operates under strict liability, requiring a plaintiff to prove only one violation to establish liability. To succeed, the plaintiff must show that (1) the collection activity arose from consumer debt, (2) the defendant qualifies as a debt collector under the FDCPA, and (3) the defendant engaged in prohibited conduct. It is undisputed that the Plaintiff is a consumer and Defendant Ability is a debt collector. However, there is contention regarding whether Defendant Ability violated specific sections of the FDCPA and whether Defendant Pendrick is liable for Ability's actions.
The Court finds that the Plaintiff is entitled to summary judgment on the FDCPA Section 1692e claim against Defendant Ability, while Defendant Ability is entitled to summary judgment on the Section 1692f claim. The motions for summary judgment are denied concerning Defendant Pendrick's potential liability as a debt collector for Ability’s Section 1692e violation.
Section 1692e prohibits debt collectors from using false, deceptive, or misleading representations in debt collection efforts. Under the "least sophisticated consumer" standard, a misrepresentation is actionable if it could mislead even the least sophisticated consumer, with no need for evidence of actual deception. The Court finds that undisputed evidence indicates Defendant Ability made misleading representations regarding the Emcare debt during a call with the Plaintiff, potentially influencing her response to the debt collection efforts.
Carlson advised the Plaintiff that the only way to resolve an error with Ability was to dispute the debt with the Credit Reporting Agencies (CRAs), which could mislead a consumer into believing that any dispute would automatically be reported, regardless of their actions. This misguidance could significantly affect how consumers respond to debt collection efforts. Following Carlson's recommendation, the Plaintiff refrained from directly contacting Ability, which Ability later cited as justification for its inaccurate credit reporting practices. Ability's representative explained that without additional information from the Plaintiff to contest the debt, they maintained a disputed status, contradicting Carlson's advice that disputing with the CRAs would suffice. The Plaintiff's experience suggests that misleading statements can lead to actual deception, as even a reasonably sophisticated consumer, knowledgeable about credit issues, was misled. Furthermore, the Plaintiff alleges that Ability violated the Fair Debt Collection Practices Act (FDCPA) by sending collection letters without verifying debt ownership. While Section 1692f prohibits unfair collection practices, the Plaintiff's claim under this provision fails as it does not address conduct distinct from other FDCPA violations.
In Stewart v. Bierman, the court found that the plaintiff’s claim under 15 U.S.C. § 1692f failed because it did not allege conduct separate from the § 1692e violations. The plaintiff's allegations were based on the same facts, specifically that the defendant, Ability, sent two collection letters without confirming the plaintiff's status as the debtor. The court noted that while the conduct could violate the Fair Debt Collection Practices Act (FDCPA), it did not constitute a separate violation of § 1692f since Ability did not know at the time it sent the letters that it was pursuing the wrong person. After a call on November 22, 2016, in which the plaintiff disputed the debt, Ability ceased sending additional letters but continued to report the debt to credit reporting agencies (CRAs). The court highlighted that if Ability had continued its collection efforts after confirming the plaintiff's identity did not match the debtor's, it may have violated § 1692e.
The court affirmed the plaintiff's entitlement to summary judgment on the § 1692e claim for stating that the plaintiff could only dispute the debt after it was reported to CRAs. However, it granted summary judgment for Ability on the § 1692f claim.
Regarding Defendant Pendrick, although the Fourth Circuit has not established vicarious liability under the FDCPA, most courts support the position that a debt collector can be held vicariously liable for unlawful collection activities performed by another entity on its behalf. The court referenced several cases that hold a debt collector accountable for unlawful practices even when outsourced. However, it emphasized that before vicarious liability can be applied, it must first be determined whether Pendrick qualifies as a debt collector under the FDCPA.
The term "debt collector" under the Fair Debt Collection Practices Act (FDCPA) is defined as any person whose principal purpose is the collection of debts, utilizing interstate commerce or the mails. This definition is the only relevant one for the current context. In *Henson v. Santander Consumer USA, Inc.*, the Supreme Court did not determine if a debt buyer seeking to collect its own purchased debts falls under this definition, but subsequent cases have ruled that debt buyers can qualify as debt collectors if collecting debts is their primary purpose.
For instance, the Third Circuit established that an entity whose revenue mainly comes from liquidating consumer debt it has acquired must comply with the FDCPA, regardless of hiring a third party for collections. In *Mitchell v. LVNV Funding, LLC*, it was determined that the primary purpose of a debt buyer's business is debt collection if it is the sole significant revenue source, even if it does not directly contact consumers. However, it was noted that the evidence did not conclusively prove that the debt buyer's principal purpose was debt collection, leaving room for a reasonable juror to infer otherwise.
In the current case involving Defendant Pendrick, similar to *Mitchell*, the evidence does not definitively establish Pendrick's principal purpose as debt collection, but when viewed favorably to the Plaintiff, it allows for the possibility that a reasonable juror could find in favor of the Plaintiff regarding Pendrick's status as a debt collector.
Pendrick acquires delinquent consumer medical debts and assigns them to collection agencies without reselling them, indicating that its revenue is derived solely from liquidating these debts. The court aligns with the Third Circuit and the Mitchell court in asserting that outsourcing debt collection does not alter the primary business purpose of a debt buyer. Pendrick previously acknowledged its status as a debt collector under the Fair Debt Collection Practices Act (FDCPA), suggesting that its classification as such is disputed.
Pendrick argues it should not be liable under the FDCPA because it had no direct interaction with the plaintiff, referencing Schlosser v. Fairbanks Capital Corp. However, the court finds this argument unpersuasive, noting that Schlosser did not address the "principal purpose" criterion for debt collectors and distinguishes between entities that lack consumer contact and those that are motivated to maintain goodwill, which Pendrick does not fit. The court emphasizes that the role of a middleman does not alter the fundamental nature of a debt collection operation. If Pendrick is deemed vicariously liable for the actions of Ability, its lack of direct contact with the plaintiff becomes irrelevant.
Regarding the defamation claim, only the defendants have moved for summary judgment, requiring the court to favor the plaintiff's perspective on factual disputes. The Fair Credit Reporting Act (FCRA) preempts common-law defamation claims unless false information is provided with malice or intent to harm. Malice can be established by proving that the defendant made a false statement knowingly or with reckless disregard for its truth. A jury could find that Ability acted with such disregard when it reported the disputed Emcare debt to credit reporting agencies despite being informed by the plaintiff that she was not responsible for it.
Ability learned on November 22, 2016, that the Plaintiff's social security number and birthdate did not match those of the debtor, and that the Plaintiff had not received emergency room services from Emcare. Consequently, a jury could reasonably conclude that Ability should not have reported the Emcare debt to credit reporting agencies (CRAs) under the Plaintiff's name. As there are remaining factual disputes, Ability is not entitled to summary judgment on the Plaintiff's defamation claim. In contrast, Pendrick is entitled to summary judgment on the same claim because the Plaintiff failed to provide evidence supporting Pendrick's vicarious liability for Ability's alleged defamation. Under the Restatement (Second) of Torts, employers of independent contractors are generally not liable for the contractors' actions unless an applicable exception is identified; the Plaintiff has not articulated such an exception.
Regarding the Maryland Consumer Debt Collection Act (MCDCA) claims, the Plaintiff acknowledged that the Fair Credit Reporting Act (FCRA) prohibits claims related to conduct covered by 15 U.S.C. § 1681s-2. However, if the MCDCA claim pertains to collection efforts distinct from Ability's responsibilities as a furnisher, state laws may impose additional requirements. The court will evaluate the MCDCA claims based solely on conduct not governed by 15 U.S.C. § 1681s-2, particularly actions taken before Ability reported information to the CRAs. Since the MCDCA defines a "collector" as someone collecting or attempting to collect a debt, Pendrick does not qualify as a debt collector under this definition, making vicarious liability inapplicable. Therefore, Pendrick's summary judgment motion regarding the MCDCA claims is granted, while Ability may still face liability under the MCDCA for threatening to disclose false information about the Plaintiff's creditworthiness, as actual knowledge or reckless disregard for the truth satisfies the statute's knowledge requirement. Legal ignorance does not protect debt collectors from liability for legal errors. Fact issues prevent Ability from successfully claiming summary judgment on this matter.
Genuine disputes of material fact exist regarding whether Defendant Ability was aware that Plaintiff was not liable for the Emcare debt and whether it threatened to report derogatory credit information despite this knowledge. During a November 22, 2016 call, Plaintiff notified Defendant Ability that she was not the debtor; however, Carlson insisted that her only option was to dispute the debt after it had been reported. A jury could infer that this framing constituted a threat to disclose negative credit information, despite Plaintiff's assertions regarding mismatched personal identification details.
Plaintiff has presented sufficient evidence indicating potential violations of the Maryland Consumer Debt Collection Act (MCDCA) and the Fair Debt Collection Practices Act (FDCPA), which also supports a claim under the Maryland Consumer Protection Act (MCPA). The MCPA prohibits unfair or deceptive practices in debt collection, defined to include false or misleading statements. Given Defendant Ability's misleading statements during the call, it likely violated the MCPA as well. The MCPA incorporates MCDCA violations, thereby linking the claims.
Consequently, Defendant Ability's motion for summary judgment on Plaintiff's MCDCA claim is unsuccessful, and the same applies to the MCPA claim. The court will grant in part and deny in part the parties' cross motions for summary judgment. Notably, after the lawsuit was filed, Defendant Ability requested the deletion of the Emcare debt from Plaintiff's credit report, suggesting an acknowledgment of Plaintiff's non-responsibility for the debt. At the summary judgment stage, the court favors the non-moving party, and thus it would be inappropriate to connect the inaccurate credit report with any increase in interest rates without supporting evidence.
In evaluating the Defendants' motions, the Court favors reasonable inferences for the Plaintiff. It is acknowledged that the Ability tradeline was removed from the Plaintiff's credit report following the lawsuit, with Ability requesting the deletion of all tradeline information regarding this debt. Defendant Pendrick is not covered under the Fair Credit Reporting Act (FCRA), and the Plaintiff does not claim vicarious liability for FCRA violations against Pendrick. Ability contends that no private right of action exists under 15 U.S.C. § 1681s-2, although the Fourth Circuit permits private suits under § 1681s-2(b) despite barring them under § 1681s-2(a). The Plaintiff's complaint references § 1681s-2(a), but her summary judgment motion focuses on § 1681s-2(b), where any claim under § 1681s-2(a) fails due to the lack of a private cause of action.
Defendant Pendrick asserts that the Plaintiff is not a consumer because she did not owe the Emcare debt. However, the Fourth Circuit allows "any aggrieved party" to bring actions under § 1692e. The Defendant is entitled to summary judgment regarding the Plaintiff's Maryland Consumer Debt Collection Act (MCDCA) § 14-202(8) claim, which prohibits debt collectors from asserting rights they know do not exist. To succeed, the Plaintiff must demonstrate that the Defendant lacked the right to collect the debt and knew so at the time of collection. The record does not indicate that Ability knew the debt did not belong to the Plaintiff when it sent initial collection letters, suggesting uncertainty rather than knowledge of the collection's invalidity. Ability is granted summary judgment on the MCDCA claim based on these findings.
