The Eastern District of New York recently decided a motion to dismiss, denying Defendant’s motion as to Plaintiff’s claims under the FCRA and dismissing Plaintiff’s claims under the FDCPA. A copy of the Court’s opinion can be found here. This case involved claims concerning a disputed tradeline on Plaintiff’s credit report. The Court found that Plaintiff, as he submitted his credit dispute through the Consumer Financial Protection Bureau’s (CFPB) portal, which then could have been transmitted to a consumer reporting agency, sufficiently alleged that he submitted his credit dispute to a consumer reporting agency. The Court further found that, as Plaintiff failed to show any communication from Defendant to a consumer reporting agency that failed to report the debt as disputed, Plaintiff failed to sufficiently allege a claim under the FDCPA.
Plaintiff filed a complaint against Defendant alleging a violation of the FCRA for failing to reasonably investigate Plaintiff’s credit dispute, and violations of the FDCPA due to Defendant failing to notate the account as in dispute and attempting to collect a debt not owed. The dispute arose in December 2018, when Plaintiff filed a dispute through the CFPB online dispute portal concerning a tradeline on his credit report for Defendant’s collecting an obligation. On January 24, 2019, Defendant sent correspondence to Plaintiff indicating that the debt was owed and that the letter was an attempt to collect a debt. Defendant contended that the tradeline was subsequently updated prior to Plaintiff filing the Complaint to remove the disputed tradeline. Plaintiff further sought damages under the FDCPA for emotional distress and time spent addressing the disputed tradeline.
Plaintiff alleged that Defendant violated the FCRA by failing to reasonably investigate the dispute and by failing to report the account as disputed. In its Motion to Dismiss, Defendant argued that, as Plaintiff initiated his dispute through the CFPB portal, and not directly with a consumer reporting agency, the FCRA does not apply. The Court looked to the relevant sections 1681s-2(b) and 1681i(a)(2) of the FCRA, which provide a private right action against any furnisher who receives notice of a credit dispute directly from a consumer reporting agency. In its opinion, the Court found that the FCRA could apply to Plaintiff’s claims, as the Court noted that further discovery would be needed into how the CFPB portal works. Namely, the Court found that the FCRA could apply to Plaintiff’s claims if his dispute submitted through the CFPB portal then went directly to a consumer reporting agency, akin to the dispute being filed by Plaintiff with a consumer reporting agency, rather than through the CFPB. The Court accordingly denied Defendant’s motion as to Wexler’s FCRA claim.
The Court did grant Defendant’s motion as to Plaintiff’s FDCPA claim. Plaintiff asserted that Defendant violated the FDCPA by failing to note that the account was in dispute, and acted to collect a debt not owed, in violation of § 1692e(8). The Court, looking at the timeline, found that Plaintiff disputed the debt in December 2018. The Court further found that, on January 18, 2019, the consumer reporting agency wrote to Plaintiff stating that the tradeline was being investigated, and on January 24, 2019, Defendant sent the requested information concerning its investigation to Plaintiff. Based on the relevant dates of Plaintiff’s dispute and Defendant’s response, it was difficult for the Court to conclude that Defendant reported the trade line delinquent to the consumer reporting agency after Defendant had learned of the dispute. By the time the Complaint was filed, Plaintiff conceded that the delinquent trade line was no longer appearing on his credit report. The Court further found that Plaintiff failed to point to any communication from Defendant stating that the account was not in dispute after the January 24, 2019 letter, which the Court noted was not sent to a consumer reporting agency. The Court concluded that, as Plaintiff failed to show which communication from Defendant failed to show the debt as disputed, and further found that, as the negative trade line was removed at some point between Plaintiff filing a dispute through the CFPB portal and the Complaint being filed, that Plaintiff failed to plausibly allege a violation of the FDCPA.
This case shows how swift action by a collection agency can lead to reduced liability under the FDCPA. While the Court left open Plaintiff’s FCRA claims due to needing additional information concerning the CFPB portal, this case is a positive decision for the collection industry as to the FDCPA claims. Prompt action by debt collectors in response to consumer disputes can make the difference between a lawsuit getting dismissed and extended litigation costs.