December 3, 2021

Volume XI, Number 337

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FCRA Claim Survives Dismissal Where Plaintiff Alleges Defendant Did Not Have a Permissible Purpose to Access Plaintiff’s Credit Report Based on Prior Discharge of Mortgage Debt in Bankruptcy

The Northern District of Illinois recently denied a motion to dismiss a FCRA claim finding that the complaint sufficiently alleged that the defendant did not have a “permissible purpose” to access the plaintiff’s credit report for collection of a mortgage debt that the plaintiff alleged was previously discharged in bankruptcy.   In Andrea Billups v. PHH Mortgage Corporation, No. 19 C 7873, 2021 WL 1648114 (N.D. Ill. Apr. 27, 2021), the plaintiff alleged that the Defendant mortgage server violated 15 U.S.C. § 1681(b) of the FCRA by obtaining her credit report on a debt that was discharged through her prior bankruptcy.

“To state a claim under section 1681b, a complaint must allege that (1) there was a consumer report; (2) the defendant used or obtained it; and (3) the defendant did so without a permissible statutory purpose.”  Billups, 2021 WL 1648114, at *2.  The court found that the plaintiff had sufficiently alleged the first two elements and the crux of the case turned on whether the mortgage servicer had a “permissible purpose” to access the plaintiff’s credit report.  In denying the motion to dismiss, the Court concluded that “deciding the ‘permissible purpose’ question is dangerously close to a factual finding, which the Court cannot make on a motion to dismiss.”  Billups, 2021 WL 1648114, at *3.

In rejecting preliminary dismissal of the FCRA claim, the Court held that the key allegation that allowed the Plaintiff to move past the pleadings stage was her assertion that the alleged mortgage debt had been discharged in bankruptcy in 2011.  In so holding, the Court emphasized that, at the pleadings stage, it must take the allegations in the Complaint as true and “without knowing why [the Defendant] obtained the credit reports, the Court cannot declare as a matter of law that it was for a legitimate reason.” Billups, 2021 WL 1648114, at *4.

Practical Tip:  This case is a good reminder that while the purpose for which a creditor pulls a consumer report may ultimately be deemed a legitimate and “permissible purpose,” courts are allowing more of these claims to proceed beyond the pleadings stage.

Copyright © 2021 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume XI, Number 134
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About this Author

Nicole Su, Womble Dickinson, Business litigation lawyer
Associate

Nicole focuses her business litigation practice on commercial and financial services cases, with a particular emphasis on Telephone Consumer Protection Act (TCPA). She is part of a nationally-recognized team that is at the forefront of the TCPA space.  Along with the team, Nicole brings the experience and capability to vigorously defend financial institutions in TCPA actions nationwide. 

Nicole is dedicated to achieving cutting-edge results for her clients.  She uses her in-depth knowledge of the TCPA to come up with creative solutions for difficult problems.

657.266.1046
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