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Third Circuit Follows Seventh to Uphold FCRA b(b)(3) Claim

Link: Long et al. v. Septa (3d. Cir. 2018)

I recently posted about the Seventh Circuit’s opinion in Robertson v. Allied Solutions, LLC.

In Long, The Third Circuit issued a similar opinion on standing where the plaintiff alleged that the Southeastern Pennsylvania Transportation Authority failed to (1) give job applicants a copy of the credit report they relied upon in taking an adverse action against them and (2) send them the appropriate notices required under § 1681b(b)(3) of the Fair Credit Reporting Act. The case was argued by Deepak Gupta and an amicus brief was filed by Francis & Mailman.

The court found that plaintiffs met Article III standing requirements espoused in Spokeo in regards to the credit reports, but not for the notices. The court applied the two-part test from Spokeo, asking whether Congress intended to grant redress for the particular injury alleged and whether the injury in question has a close relationship to a harm traditionally recognized under common law.

As to the claim for failing to give a copy of the report, the court pointed out the unambiguous language in the FCRA creating a right of action and said this about the historical analysis:

Common-law privacy rights were historically understood as being invaded by “(a) unreasonable intrusion upon the seclusion of another, . . . (b) appropriation of the other’s name or likeness, . . . (c) unreasonable publicity given to the other’s private life, . . . or (d) publicity that unreasonably places the other in a false light before the public . . . .” Restatement (Second) of Torts § 652A(2)(a)-(d) (1977). These latter three types of privacy torts represent interference with an individual’s ability to control his personal information. That is analogous to the injury here, which is the use of Plaintiffs’ personal information—their consumer reports—without Plaintiffs being able to see or respond to it.

The Third Circuit called out the Robertson case, saying “[t]he Seventh Circuit concluded, as do we, that a plaintiff has standing to sue based on allegations that she did not receive the pre-adverse action notice required by § 1681b(b)(3).”

As to the claim regarding the notice requirements, the court found it was a bare procedural violation, divorced from any concrete harm, that cannot satisfy the injury-in-fact requirement of Article III. “Plaintiffs became aware of their FCRA rights and were able to file this lawsuit within the prescribed limitations period, so they were not injured … Plaintiffs are similar to Groshek, and like him, they lack standing, because although they did not receive FCRA rights disclosures, they understood their rights sufficiently to be able to bring this lawsuit.”

No Right for Third Party to Assume Mortgage; No Right of Action Under 1024.17

Link: Cybulski v. Nationstar Mortgage LLC, No. 17-cv-03711 (N.D. Ill., Aug. 30 2018)

Plaintiff filed a complaint alleging that Nationstar improperly serviced a mortgage loan by failing to allow a third party to assume the note and mortgage under the Real Estate Settlement Procedures Act, failing to properly manage their escrow account, and failing to give them appropriate notices under the Truth in Lending Act.

Judge Andrea R. Wood dismissed the complaint under Rule 12(b)(6). The court found that a party does not have the right to unilaterally modify a contract, and as such a third party cannot just come in and demanded to be “added” to a mortgage loan. The court similarly found there is no claim under RESPA’s implementing Regulation X, 12 C.F.R. § 1024.17, because Congress did not intend consumers to have a private right of action for a failure to give an appropriate refund from an escrow account. The court rejected Plaintiff’s argument they were suing under 2605(f) of RESPA which relates to responding to a notice of error or request for information.

As to the TILA claim, the court found it does not require a payment coupon and that it was acceptable under TILA for a mortgage servicer to send statements to the Plaintiff’s lawyer.

7th Circuit Upholds FCRA Adverse Action Claim Under Spokeo

Link: Robertson v. Allied Solutions, LLC, (7th. Cir. 2018)

Plaintiff Shameca Robertson, through Matthew A. Dooley, filed a putative class action lawsuit against Allied Solutions, LLC for its failure to provide an adverse-action notice as required under § 1681b(b)(3)(A) of the Fair Credit Reporting Act.  Robertson applied for a job with Allied and was rejected based on adverse criminal history information. Allied allegedly failed to give Robertson the notice required in the statute or a copy of the background check it relied on in making its decision. Plaintiff filed an unopposed motion to approve a settlement, but the court raised the issue of Article III standing sua sponte and demanded briefing on whether the case of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) required dismissal. The district court (William T. Lawrence of the S.D. Ind) found that the claim failed to allege a concrete injury and dismissed the case.

The Seventh Circuit reversed, finding that given the language and purpose of the Act, an employer’s duty to disclose is not linked with the inaccuracy of the underlying report. Instead, the section regulating users of reports (like prospective employers) deal primarily with disclosures.

The substantive interest behind a user’s disclosure obligation is the one at issue here: allow the consumer to review the reason for any adverse decision and to respond. These rights are independent of any underlying factual disputes. A consumer might, for example, wish to concede the facts presented in the report but to bring additional facts to the employer’s attention that put matters in a better light for the consumer. In other words, the consumer might wish to use the “confession and avoidance” option that existed at common law … Providing context may be more valuable than contesting accuracy. Some consumers may collect supporting documents quickly enough to corroborate an accuracy challenge before the employer makes its decision.

The Court relied on precedent that finds that Article III standing is met where a plaintiff alleges they were deprived of a chance to obtain a benefit; so it doesn’t matter whether they were actually deprived of that benefit. Czyzewski v. Jevic Holding Corp.,137 S. Ct. 973, 983 (2017). The Court also noted that an informational injury can be concrete when the plaintiff is entitled to receive and review substantive information. In sum:

What matters is that Robertson was denied information that could have helped her craft a response to Allied’s concerns.


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).

Court Dismisses Class Privacy Suit Against Southwest Airlines

Link: Miller v. Southwest Airlines Co., 18-cv-86 (N.D. Ill., Aug. 23, 2018)

Plaintiffs, through counsel Hart McLaughlin & Eldridge, LLC, filed a class action against Southwest Airlines alleging they violated the Illinois Biometric Information Privacy Act, 740 ILCS 14/1, et seq., by requiring employees to scan their fingerprint but (1) did not provide notice to employees regarding the biometric timekeeping program; (2) did not obtain written informed consent from the employees who are required to use the biometric timekeeping program; and (3) failed to publish data retention and deletion policies for its employees. Defendant removed the state case to federal court, then filed a motion to dismiss for failure to state a claim under rule 12(b)(6) and that Plaintiff’s claims are preempted by the Railway Labor Act, 45 U.S.C. § 181. The RLA governs collective bargaining agreements in the railroad and airline industries.

Judge Marvin E. Aspen agreed that Plaintiff met its burden under Article III standing under Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016), and thus did not dismiss the case under 12(b)(6). However the court granted Southwest’s motion to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3) because Plaintiff’s claims are subject to mandatory arbitration or collective bargaining negotiations under their collective bargaining agreements and the RLA.

FDCPA Letter Claim Dismissed in Part under 1692e(5)


Link: Cadiz, v. CREDENCE RESOURCE MANAGEMENT, LLC, 17-cv-1949 (N.D. Ill., Aug. 24, 2018)

Judge Andrea R. Wood granted in part and denied in part a debt-collector’s motion to dismiss a claim under the Fair Debt Collection Practices Act alleging that the following language violated 15 U.S.C. 1692(e):

The above listed account owing to AT&T Mobility has been assigned to Credence Resource Management, LLC for collections. This account is currently delinquent and due in full. We would like to resolve this matter amicably, therefore please send your payment for the above amount. . . .

Plaintiff alleged the above language violated § 1692e of the FDCPA by threatening the possibility of a lawsuit when Credence did not actually intend to take any legal action.

The court allowed the general e and (e)10 claim to proceed, but dismissed the e(5) claim.

Credence’s statements are not clearly misleading. But the Court cannot say that they in no way could be interpreted as misleading to the unsophisticated consumer. Rather, the letter is properly categorized as the second type of claim—for it is plausible that the use of the word “amicably” could mislead the unsophisticated consumer into believing that litigation was a possibility if the debt were left unresolved. See McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1022 (7th Cir. 2014) (finding that the use of the phrase “offer to settle” in a collection letter seeking payment of a time-barred debt could mislead the unsophisticated consumer to believe that the debt was legally enforceable, even though the possibility of legal action was not mentioned in the letter.)

The court drew a strong distinction between the letter’s language above and the language in the letter in the case of  Clark v. Retrieval Masters Creditors Bureau, Inc., 185 F.R.D. 247, 251 (N.D. Ill. 1999), where the letter said:

The [American Medical Collection Agency] has been authorized to take appropriate legal measures to obtain payment.” and “[T]his is your final opportunity to settle your account without incurring additional problems.


FCRA Claim May Proceed Against Mortgage Servicers Based on Trial Loan Modification


Link: Pittman v. EXPERIAN INFORMATION SOLUTIONS, INC., (6th Cir. 2018)

This is a Sixth Circuit case worth reading because it contains an interesting discussion of how a trial loan modification of a mortgage can constitute an enforceable agreement and change the way a furnisher should be reporting the trade line to credit reporting agencies. The court reversed the entry of summary judgment in favor of defendants and remanded the case.

 If Pittman can show that there was indeed an enforceable agreement to modify his loan and that the Servicers were supposed to send him a permanent loan modification but instead reported him to the CRAs as being behind on his loan, then Pittman could make the threshold showing of inaccuracy required for a FCRA claim.

Plaintiffs through Edward A. Mahl of Michigan Consumer Credit Lawyers are alleging mortgage servicers BSI Financial Services and iServe Servicing, Inc. violated 15 U.S.C. § 1681s-2(b), which imposes certain duties on furnishers of information upon notice of a dispute sent to a consumer reporting agency. And of course the court refers to the seminal case on loan modifications and the Home Affordable Modification Program: Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 554 (7th Cir. 2012).

Debt Collector Can’t Undo Stipulated Judgment


 Currier v. PDL RECOVERY GROUP, LLC, 2014-12179 (E.D. Mich., Aug. 23, 2018)

Plaintiff Ryan Currier, through counsel Ian Lyngklip of Lyngklip & Associates Consumer Law Center, PLC, defeated a defendant debt collector’s motion for relief from judgment under Federal Rule of Civil Procedure 60. The court roundly rejected defendant’s motion, since it was stipulated to with the advice of counsel. The court noted that such a challenge  “faces a steep uphill climb.” Cummings v. Greater Cleveland Regional Transit Authority, 865 F.3d 844, 846 (6th Cir. 2017).

Court Grants Plaintiff’s Remand to State Court Based on Spokeo


link: Soto v. Great America, LLC, 2017-cv-6902 (N.D. Ill., May 24, 2018)

Plaintiff Hugo Soto, represented by Edelman, Combs, Latturner & Goodwin LLC, filed a class action in Lake County, Illinois state court against Great America under 15 U.S.C. § 1681c(g)(1) of the Fair Credit Reporting Act as Amended by the Fair and Accurate Transactions Act of 2003, which prohibits printing more than the last five digits of a credit or debit card number on an electronically printed receipt.

Defendant removed the case to federal court and then Plaintiffs moved for a remand to state court on the basis that the court lacked jurisdiction because the damages alleged do not meet the federal standing requirements imposed by Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).

Judge Robert M. Dow agreed with Plaintiff’s reliance on Meyers v. Nicolet Restaurant of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016), where the Seventh Circuit addressed the application of these standing principles to FACTA claims. The Seventh Circuit in Meyers held that plaintiffs alleging only bare procedural violations of FACTA lack Article III standing because they have not suffered an injury-in-fact. 843 F.3d at 727-28 (plaintiff lacked standing because his claim that restaurant failed to truncate a payment card’s expiration date did not allege actual harm and thus was insufficient to satisfy Article III’s injury-in-fact requirement).

Defendant argued the remand would be futile because the state court would lack jurisdiction to hear the case for the very same reason, relying on Porch-Clark v. Engelhart, 930 F. Supp. 2d 928, 936 (N.D. Ill. 2013). The court rejected this argument and found that remand was still warranted because the issue of Plaintiffs’ standing to pursue their FACTA claim in state court depends on an interpretation of state standing law, and that “it is not clear that the Illinois injury-in-fact requirement is identical to its federal analogue.”

Plaintiffs’ motion also requested attorneys’ fees pursuant to 28 U.S.C. § 1447(c), but the court denied that request and found that the defendant could have reasonably believed it would be able to distinguish Meyers given the damages alleged in the complaint.

TCPA Class Against Heska Corp. is Certified

link: Fauley v. Heska Corpoartion, 2015-cv-2171 (N.D. Ill, Aug. 24, 2018)

Shaun Fauley, through counsel Anderson + Wanca, filed a motion to certify a class alleging that defendant Heska contacted over 10,850 customers via fax in violation of the Telephone Consumer Protection Act. After rehashing issues with Heska contacting class members in a “reconfirmation” effort to retroactively obtain customers’ consent, the court certified the following class:

All persons or entities who were successfully sent one or more facsimiles regarding Heska Corporation’s goods or services from March 12, 2011, through July 21, 2014, that either (1) contain no “opt-out notice” explaining how to stop future faxes or (2) contain an opt-out notice stating, “To unsubscribe from Heska’s promotional faxes, please call 800-464-3752, ext. 4565 or fax (970) 619-3008, and indicate your clinic name and fax number.”

The Court applied the standard used by the D.C. Circuit in the case of Bais Yaakov, agreeing that the TCPA does not impost an opt-out requirement on solicited faxes. The court also noted Heska timely obtained an FCC waiver of the opt-out rule for solicited fax advertisements.