The United States District Court for the Eastern District of New York recently decided a motion to dismiss in Wexler v. Reliant Capital Solutions, LLC, denying Reliant’s motion as to plaintiff Marshall Wexler’s claims under the Fair Credit Reporting Act and dismissing Wexler’s claims under the Fair Debt Collection Practices Act. A copy of the Court’s opinion can be found here. This case involved claims by Wexler concerning a disputed tradeline on his credit report. The Court found that Wexler, as he submitted his credit dispute through the Consumer Financial Protection Bureau’s 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 Wexler failed to show any communication from Reliant to a consumer reporting agency that failed to report the debt as disputed, Wexler did not sufficiently allege a claim under the FDCPA.
Wexler filed a complaint against Reliant alleging a violation of the FCRA for failing to reasonably investigate Wexler’s credit dispute, and violations of the FDCPA due to Reliant failing to notate the account as in dispute and attempting to collect a debt not owed. The dispute arose in December 2018, when Wexler filed a dispute through the CFPB online portal concerning a tradeline on his credit report for Reliant collecting a student loan obligation on behalf of Wexler’s school. On January 24, 2019, Reliant sent correspondence to Wexler indicating that the debt was owed to his school and that the letter was an attempt to collect a debt. Reliant contended that the tradeline subsequently was updated prior to Wexler filing the Complaint to remove the disputed tradeline. Wexler further sought damages under the FDCPA for emotional distress and time spent addressing the disputed tradeline.
Wexler alleged that Reliant violated the FCRA by failing to reasonably investigate the dispute, and by failing to report the account as disputed. In its motion to dismiss, Reliant argued that, as Wexler initiated his dispute through the CFPB portal as opposed to 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 of 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 Wexler’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 Wexler’s claims if his dispute that was submitted through the CFPB portal then went directly to a consumer reporting agency, akin to the dispute being filed by Wexler with a consumer reporting agency, rather than through the CFPB. The Court accordingly denied Reliant’s motion as to Wexler’s FCRA claim.
The Court did grant Reliant’s motion as to Wexler’s FDCPA claim. Wexler asserted that Reliant violated the FDCPA by failing to note that the account was in dispute, and acted to collect a debt not owed, in violation of Section 1692e(8). The Court, looking at the timeline, found that Wexler disputed the debt in December 2018. The Court further found that, on January 18, 2019, the consumer reporting agency wrote to Wexler stating that the tradeline was being investigated; and on January 24, 2019, Reliant sent the requested information concerning its investigation to Wexler. Based on the relevant dates of Wexler’s dispute and Reliant’s response, it was difficult for the Court to conclude whether Reliant reported the trade line as delinquent to the consumer reporting agency after Reliant had learned of the dispute. By the time the complaint was filed, Wexler conceded that the delinquent trade line was no longer appearing on his credit report. The Court further found that Wexler failed to point to any communication from Reliant 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 Wexler failed to identify which communication from Reliant failed to show the debt as disputed, and finding that the negative trade line was removed at some point between Wexler filing a dispute through the CFPB portal and filing the complaint in federal court, Wexler 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 Wexler’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. Swift action by debt collectors in response to consumer disputes can make the difference between a lawsuit getting dismissed and extended litigation costs.