Quale v. Unifund CCR Partners

Citations: 682 F. Supp. 2d 1274; 2010 U.S. Dist. LEXIS 7203; 2010 WL 338044Docket: Civil Action No. 09-0519-CG-M

Court: District Court, S.D. Alabama; January 26, 2010; Federal District Court

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The court has adopted the Magistrate Judge's Report and Recommendation regarding Defendant Unifund CCR Partners' Motion to Dismiss. The motion is denied concerning Count One, which alleges violations of the Fair Debt Collection Practices Act (FDCPA), as the plaintiff claims Unifund failed to validate a debt and reported derogatory information to credit agencies. However, the motion is granted for Counts Two and Three, which pertain to violations of the Fair Credit Reporting Act (FCRA), leading to their dismissal without prejudice. The plaintiff, acting pro se, asserted that after disputing the debt in January 2008, Unifund did not provide validation and erroneously reported the debt. Unifund's motion argued that the FDCPA claim should be dismissed due to the lack of allegations regarding attempts to collect the debt post-validation request and contended that the FCRA claims lack a private right of action for inaccurate reporting. The court applies a standard of review that favors the plaintiff's well-pled facts but does not accept legal conclusions or unwarranted factual deductions.

A complaint may be dismissed if it fails to state a plausible claim for relief, as established by the Supreme Court in Iqbal and Twombly, which require more than mere labels or a formulaic recitation of claims. The factual allegations must raise a right to relief above a speculative level, allowing for reasonable inferences of liability against the defendant. Pro se pleadings are to be construed liberally, but the court will not act as the plaintiff’s attorney or fix deficiencies in the pleadings.

In this case, the plaintiff is suing Unifund for violations of the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA). Under the FDCPA, specifically 15 U.S.C. § 1692g(b), a debt collector must cease collection efforts upon receiving a written dispute from the consumer until the debt is verified. The plaintiff claims to have requested debt verification from Unifund on January 3, 2008, within the appropriate time frame, but has not received a response. Unifund argues that it was only required to provide verification if it continued its collection efforts, which the plaintiff has not alleged. However, if a debtor disputes the debt, the collector must halt collection until the dispute is resolved. If the collector ceases collection, it is not obligated to send separate verification to the debtor.

Under Section 1692g(b) of the Fair Debt Collection Practices Act (FDCPA), a debt collector must cease collection activity upon receiving a written dispute within the 30-day validation period unless the debt is verified. The case Purnell v. Arrow Financial Services LLC illustrates that debt collectors can either choose not to validate a debt and stop collection efforts or verify the debt and continue collection. The plaintiff alleges that the defendant reported a disputed debt to credit agencies without validating it, raising potential violations of 1692g(b). While the Sixth Circuit has not definitively ruled on whether such reporting constitutes "collection activity," it has suggested that it may be prohibited under 1692g(b), as indicated in Purnell. The court referred to an FTC Staff Opinion Letter stating that reporting a debt during the validation period after receiving a dispute is not allowed and that this reporting can be a tactic to pressure consumers into payment. Although the district court in Purnell initially ruled the claim time-barred, the Sixth Circuit reversed this decision, acknowledging the potential violation and remanding the case for further proceedings. Similarly, in Campbell v. Credit Bureau Systems Inc., the court recognized that reporting a debt could constitute collection activity but ultimately ruled against the plaintiff due to a failure to timely request verification. Additionally, another case, Semper v. JBC Legal Group, supported the position that all attempts to collect a debt, including reporting to credit agencies, are impermissible until the debt is verified. Conversely, in Breed v. Nationwide Insurance Co., the court rejected the notion that reporting to a credit bureau constitutes an attempt to collect a debt, indicating a lack of authoritative support for this argument.

In the context of the Fair Debt Collection Practices Act (FDCPA), the court notes that the Breed case did not clarify whether the plaintiff had requested debt verification, if the debt collector had reported information before verification, or if the debt collector had informed credit agencies of the debt's disputed status. Consequently, Breed offers limited relevance to the current case. The court references Jackson v. Genesys Credit Mgmt., indicating that 15 U.S.C. § 1692g(b) does not explicitly prohibit reporting debts to credit agencies, particularly since the plaintiff in Jackson did not request verification, which meant the reporting could continue unimpeded.

The court finds the reasoning in Purnell persuasive, determining that the plaintiff's allegations—that the defendant failed to verify the debt after a request and reported it to Experian and Innovis without indicating it was disputed—adequately state a claim under § 1692g(b). Additionally, the plaintiff's claims also invoke § 1692e, which prohibits misleading representations related to debt collection, including failing to notify credit agencies about a disputed debt. Citing Gilmore v. Account Mgmt. Inc., the court reinforces that reporting a disputed debt without notifying the credit reporting agency constitutes a violation of the FDCPA.

The plaintiff asserts he disputed the debt in writing, and the defendant acknowledged receipt of this communication. The court concludes that the allegations suggest the defendant should have recognized the debt was disputed prior to reporting it, thus stating a claim under both § 1692g(b) and § 1692e. As a result, the court denies the defendant’s motion to dismiss Count One of the plaintiff's complaint regarding FDCPA violations. Additionally, the plaintiff's Count Two alleges violations of the Fair Credit Reporting Act (FCRA) due to the defendant's failure to validate the debt and reporting incorrect information to the credit bureaus.

Count Three alleges that Defendant violated the Fair Credit Reporting Act (FCRA) by not notifying Experian and Innovis of a disputed debt. Defendant's Motion to Dismiss argues that Counts Two and Three should be dismissed because Plaintiff lacks a private right of action for providing inaccurate information to credit reporting agencies. Under Section 1681s-2(a) of the FCRA, furnishers cannot provide false information, but private lawsuits for such violations are explicitly prohibited. The FCRA allows state actions, as noted in Peart v. Shippie and Green v. RBS Nat’l Bank, but not private suits for 1681s-2(a) violations. While Section 1681s-2(b) permits private actions for failing to investigate reported information accuracy upon receiving a consumer dispute notice from a reporting agency, Plaintiff did not allege that Defendant received such notice. Consequently, Counts Two and Three fail to state a claim under the FCRA for two reasons: no private right of action exists under 1681s-2(a), and 1681s-2(b) requires notification from a reporting agency, which was not claimed. The recommendation is to deny dismissal of Count One, grant dismissal of Counts Two and Three without prejudice, and inform parties of their rights to object within ten days.

A party may challenge a magistrate judge's recommendation in a dispositive matter by filing a "Statement of Objection to Magistrate Judge’s Recommendation" within ten days of receiving the recommendation, as outlined in SD ALA LR 72.4. The objection must specify the contested portions and their basis, accompanied by a brief arguing for de novo review by the district judge. Merely resubmitting the original brief is insufficient, and failure to submit a supporting brief may be interpreted as abandoning the objection. Appeals can only be made from the district judge’s order, not from the magistrate judge's recommendation. 

For those unable to pay for a transcript, a judicial determination is required to cover costs under 28 U.S.C. 1915 and Fed. R. Civ. P. 72(b). The plaintiff has also named National City Card Services as a defendant, but the Motion to Dismiss pertains solely to Defendant Unifund. Under Section 1692, which addresses abusive debt collection practices, a debt collector must provide specific information to consumers within five days of initial communication, including the debt amount and creditor name, and must inform consumers of their rights regarding the validity of the debt. The plaintiff claims that Unifund reported derogatory information to credit agencies without indicating that the debt was disputed, which is construed by the court to include all related allegations in the complaint.

In Sullivan v. Equifax, Inc., the court highlighted the significance of reporting debts to credit agencies as a means to ensure compliance with payment terms. It noted that a debt collector failed to report a disputed debt. Under Section 1681s-2(a) of the Fair Credit Reporting Act (FCRA), furnishers of information are prohibited from reporting inaccuracies when they know or should reasonably believe the information is incorrect. Specifically, they cannot report information after being notified of its inaccuracy by the consumer. Unpublished opinions, while not binding precedent, can serve as persuasive authority. Section 1681s-2(c) clarifies that civil liability for noncompliance does not extend to violations of subsection (a), barring private rights of action against furnishers for false reporting, though states may pursue actions for such violations. Section 1681s-2(b) requires furnishers to investigate disputes reported by consumer agencies and communicate the findings. This case will proceed with the plaintiff's claims related to violations of Sections 1692g(b) and 1692e of the Fair Debt Collection Practices Act (FDCPA).