The Importance of Reasonable Procedures: After Finding Article III Standing, Court Dismisses FCRA Claim
While not a TCPA case, we at TCPAWorld know that FCRA cases are close cousins to TCPA cases when it comes to challenging standing. In Davis v. Carrington Mortg. Servs., 2020 U.S. Dist. LEXIS 65347 (D. Nv. Apr. 10, 2020), plaintiff alleged that defendant CRA violated Sections 1681e and 1681i of the FCRA by failing to report the timely payments made by plaintiff on her mortgage account and by failing to conduct a reasonable reinvestigation into the account to correct her information. While the court rejected defendant’s standing challenge, it went on to dismiss the case because even assuming plaintiff had pled an inaccuracy, plaintiff failed to allege the defendant’s procedures were unreasonable and failed to allege that she notified the CRA of the inaccuracy that was the basis of her claim.
Arguing that plaintiff made only broad generalizations about her lower FICO scores impacting lending decisions generally, defendant CRA argued that plaintiff failed to assert a concrete injury. However, the court disagreed, noting that plaintiff “alleges specifically that her creditworthiness impacted her mortgage refinancing with” her existing mortgage company. The court found that it was not “implausible” to conclude that plaintiff’s mortgage company would rely on a FICO score when making refinancing determinations and that suppression of timely mortgage payments could negatively impact such a score. “As such, [plaintiff] has alleged a concrete and particularized injury fairly traceable to [defendant’s] conduct.”
As to defendant CRA’s motion to dismiss for failure to state a claim, the court noted that to state a claim under Section 1681e, in addition to establishing inaccurate reporting, a plaintiff must also establish that the CRE did not follow reasonable procedures in obtaining her credit information. Plaintiff argues that the CRA inaccurately reported that her mortgage account was included and discharged in her Chapter 13 bankruptcy. However, as the CRA pointed out, there was a letter from the mortgage company indicating that plaintiff’s mortgage account was included in her bankruptcy. Plaintiff argued that the CRA was obligated to determine the legal question of whether the mortgage was included in the bankruptcy. But the court found to the contrary, stating: “CRAs are neither qualified or obligated to determine the legal status of a plaintiff’s debt.” Moreover, the court found that plaintiff never put the CRA on notice that her mortgage account was not included in her bankruptcy. Thus, the court concluded that plaintiff had failed to plausibly allege that the CRA failed to follow reasonable procedures in determining that plaintiff’s mortgage was discharged in bankruptcy. Plaintiff’s failure to notify the CRA that her mortgage account was not included in her bankruptcy was also fatal to her reinvestigation claim under Section 1681i. Having already amended her complaint twice, the court also denied plaintiff leave to amend on the basis that any amendment would be futile.
While the deficiencies in plaintiff’s allegations played a role in the outcome of this case, one can never underestimate the importance of having reasonable procedures in place. They often save the day!