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Court Dismisses ECOA Suit Claiming Lender Demanded Consumer Retract Credit Disputes

Link:  KOLODZINSKI v. PENTAGON FEDERAL CREDIT UNION, Case No. 17-CV-1768-JPS (E.D. Wisc. Aug. 28, 2018)

SmithMarco PC filed a suit on behalf of Plaintiff alleging that he was discriminated against in violation of the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691 et seq. because when he applied for a loan, the loan officer told him he had to remove the disputes from his credit report in order to obtain the loan. Once he did so, his credit score went down so low he could no longer obtain the loan.

Plaintiff argued that because his right to dispute credit lines derives from the Fair Debt Collection Practices Act and Fair Credit Reporting Act,  Defendant violated ECOA which provides that a creditor cannot discriminate against an applicant “because the applicant has in good faith exercised any right under this chapter.” 15 U.S.C. § 1691(a)(3). “[T]his chapter” refers to Chapter 41 of Title 15, entitled the Consumer Credit Protection Act (“CCPA”) which has within it the FDCPA and FCRA.

The court disagreed, finding that the FDCPA confers on consumers a private right of action to remedy violations of the statute, so ECOA just requires lenders not to discriminate against consumers who file such a private action.

As to the FCRA, the court drew a distinction between a duty and a right, stating that Plaintiff has not alleged that any person or consumer reporting agency failed to properly provide notice of a dispute in violation of Section 1681s-2(3), or that he exercised his right under the FCRA to seek a remedy for such a violation:

A consumer’s dispute is a precondition to the triggering of a duty; it is not an affirmative right conferred by the statute.

The court also noted that Plaintiff’s reading of the statute did not comport with Regulation B issued by the Consumer Financial Protection Bureau.

 Defendant has chosen to restrict the type of credit history it will consider to dispute-free reports, and that restriction is applied to all credit applicants. Plaintiff does not allege that this restriction is applied in a nonuniform way, and Defendant confirms in its briefing that this restriction is applied to every credit applicant.

Accordingly the court dismissed the lawsuit as failing to state a claim under Rule 12(b)(6).