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Cook v. Mountain America Federal Credit Union

United States District Court, D. Arizona

August 29, 2019

Tyler Cook, Plaintiff,
Mountain America Federal Credit Union; Experian Information Solutions, Inc.; Equifax Information Services, LLC; and TransUnion, LLC, Defendants.


          H. Russel Holland United States District Judge

         Plaintiff moves for partial summary judgment.[1] This motion is opposed, [2] and defendant cross-moves for summary judgment.[3] Defendant's cross-motion is opposed.[4] Oral argument was requested and has been heard.


         Plaintiff is Tyler Cook. Defendant is Mountain America Federal Credit Union.

         In 2013, plaintiff purchased a vehicle which was financed by defendant. In 2015, plaintiff fell behind on his payments and the vehicle was repossessed and sold at auction. There was a deficiency balance of $13, 651.53. In December 2015, defendant turned plaintiff's account over to Financial Assistance, Inc. (FAI) for collection.

         Both defendant and FAI reported the deficiency balance to credit reporting agencies (CRAs).[5] FAI's contract with defendant authorized FAI to report an assigned debt after 60 days.[6]

         In October of 2017, plaintiff began applying for rental properties because he and his wife had recently sold their home. Plaintiff and his wife applied for a rental property with Lotus Real Estate on October 3, 2017.[7] Lotus Real Estate stated that “[b]ased on their income and other factors, we would have no problem approving them.”[8] Plaintiff and his wife also applied for a rental with Waypoint but did not pursue that application because the rental agent told plaintiff that “[t]hings that result in a denial are bankruptcies, foreclosures, monies owed to properties, felonies, judgments, evictions, repossessions, [and a] large amount of account[s] in collections.”[9]

         On October 25, 2017, plaintiff's rental application with Rentals America was declined based on his credit.[10] More specifically, plaintiff's application was declined because he had “more than $2500 [in] outstanding debt” and “more than 5 outstanding collections[.]”[11]

         Plaintiff's FICO score in October 2017 was 527 and his credit report included “9 potentially negative items.”[12] Two of these potentially negative items were FAI's tradeline and defendant's tradeline.[13] FAI's tradeline listed the account as a “collection account, ” the status as “In Collections, ” and the current balance as $13, 652.[14] Defendant's tradeline listed the account as an “installment account, ” the status as “Charged Off, ” and the balance as $13, 651.[15] There were also four other “charged off” accounts listed and three other “in collections” accounts.[16] The total past due amount listed on plaintiff's credit report was $30, 228, which did not include both the $13, 651 being reported by defendant and the $13, 652 being reported by FAI.[17] Only the $13, 652 was included in the total past due amount. In the credit and collection history portion of his credit report, FAI was listed as a creditor of a “collection account” that had been originally defendant's account and there was a notation that this was a deficiency after a repossession.[18] There was also a notation that this was a “seriously past due” account that had been “assigned to attorney/collection agency or credit grantor's internal collection department.”[19] Defendant was listed as a creditor of an “installment account” that had been “charged off” and there was a notation that this was for an “auto loan” and that the “unpaid balance was reported as a loss by [the] credit grantor[.]”[20]

         On October 26, 2017, plaintiff and his wife signed a one-year lease with Peace Properties.[21] Plaintiff and his family moved out of this property before the lease expired and moved in his father.

         On October 31, 2017, plaintiff sent letters to TransUnion, Experian, and Equifax, disputing how the deficiency balance was being reported. Plaintiff testified that he hired a credit repair agency to assist him with these letters.[22] As to the FAI account, plaintiff stated that “[t]he information [being reported] is minimal; there is no first Delinquency or Date of Last Activity even reported. I believe the account is being re-aged and needs to be removed.”[23] As to defendant's account, plaintiff stated that his credit report

shows [this] account was “transferred or sold.” If an account is SOLD and the creditor no longer owns it, . . . it cannot be reported as a collectible debt. In addition to the Balance amount, there are other errors I see in the account reporting, such as the Date of Last Activity and the Payment History. Please DELETE any Balance and correct the other issues on the account immediately or delete it entirely.[24]

         On November 30, 2017, [25] plaintiff wrote directly to defendant to dispute how the deficiency balance was being reported. Plaintiff stated that defendant was “reporting that this account was ‘Sold'” and asked how defendant could be reporting the account if it had been sold.[26] Plaintiff also requested that defendant provide him with proof that defendant was accurately reporting his account, in the form of his actual payment history and a copy of his original loan agreement.[27] Plaintiff stated that “[a] reply from you [defendant] simply stating the account is being reported correctly, without the proof above is NOT sufficient under the law. Reporting a ‘Sold Account' with a collectible balance is already non-compliant with the law.”[28] Defendant did not reply to this letter.

         Defendant did, however, receive “several Automated Consumer Dispute Verifications (‘ACDVs') from the credit bureaus concerning [its] reporting of” plaintiff's account “via a web-based system called Online Solution for Complete and Accurate Reporting or ‘e-OSCAR[].”[29] Defendant provided responses to the ACDVs via e-OSCAR after it had “thoroughly reviewed the Cook account, and verified that all information transmitted to the credit bureaus was accurate.”[30]

         On November 30, 2017, plaintiff again sent letters to TransUnion, Experian, and Equifax, stating that he did not believe that FAI's and defendant's tradelines were “being reported legally.”[31] Plaintiff asked TransUnion and Experian to “explain to me HOW you conducted your investigation: who you talked to at [FAI and defendant], copies of email[s, ] communications, copies of documents reviewed and any data provided, such as date of the first delinquency.”[32] Because plaintiff had not received a reply from Equifax to his original letter, he advised Equifax that “[it] must be that the information I disputed was either inaccurate, or it could not be verified so it needs to be deleted.”[33]

         On January 2, 2018, plaintiff wrote to TransUnion and Equifax again. As to the FAI account, plaintiff again complained that the “information [being] report[ed] is minimal; there is no Date of first Delinquency or Date of Last Activity even reported. I believe this account is being re-aged and needs to be removed.”[34] As to defendant's account, plaintiff stated that he had not received a response to his November letter and he requested a response in the next 15 days or he would “immediately file a CFPB complaint.”[35]

         On January 2, 2018, plaintiff also wrote to defendant again, requesting that defendant provide his payment history and a copy of the original loan agreement in order to validate the debt.[36] Plaintiff wrote that “[i]f I do not receive absolute proof from you within 15 days, you must delete this account from my credit file or be prepared to face legal action.”[37]

         On February 12, 2018, plaintiff wrote to Equifax and TransUnion once more, this time advising them that after he received their responses to his dispute letters, he contacted defendant directly to ask defendant “to verify the negative listing.”[38] Plaintiff advised that defendant had not responded to his request and that he felt that defendant was violating the Fair Credit Reporting Act.[39]

         Plaintiff avers that “[d]ue to the duplicative reporting on my credit report, I have been denied credit for the purchase of a new home.”[40] Plaintiff also avers that “[a]s a result of these denial[s] and our inability to find a home to rent, my wife and I spent considerable time without a home and were forced to live [with] my father 60 miles from my place of employment.”[41] Plaintiff avers that “[t]his was humiliating to me and my family and caused a great deal of stress in my marriage” and “has caused me to suffer extreme emotional distress as well as many sleepless nights.”[42]

         Plaintiff commenced this action on May 22, 2018. In his amended complaint, plaintiff asserts a single cause of action against defendant, a claim that defendant violated Section 1681s-2(b) of the Fair Credit Reporting Act (FCRA). Plaintiff seeks actual, statutory, and punitive damages.

         Plaintiff now moves for summary judgment on the issues of liability and willfulness. Defendant cross-moves for summary judgment dismissing plaintiff's FCRA claim.


         Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The initial burden is on the moving party to show that there is an absence of genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party meets its initial burden, then the non-moving party must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In deciding a motion for summary judgment, the court views the evidence of the non-movant in the light most favorable to that party, and all justifiable inferences are also to be drawn in its favor. Id. at 255. “‘[T]he court's ultimate inquiry is to determine whether the ‘specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence.'” Arandell Corp. v. Centerpoint Energy Services, Inc., 900 F.3d 623, 628-29 (9th Cir. 2018) (quoting T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987)).

         The FCRA was enacted “‘to ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.'” Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1153 (9th Cir. 2009) (quoting Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007)). “[T]he FCRA imposes some duties on the sources that provide credit information to CRAs, called ‘furnishers' in the statute.” Id. Defendant is a furnisher.

         “Section 1681s-2 [of the FCRA] sets forth ‘[r]esponsibilities of furnishers of information to consumer reporting agencies,' delineating two categories of responsibilities.” Id. at 1154. Plaintiff's claim is based on subsection 2(b).

Subsection 1681s-2(b) provides that, after receiving a notice of dispute from a CRA, the furnisher shall:

“(A) conduct an investigation with respect to the disputed information;
(B) review all relevant information provided by the [CRA] pursuant to section 1681i(a)(2) . . .;
(C) report the results of the investigation to the [CRA];
(D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other [CRAs] to which the person furnished the information . . .; and
(E) if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1) . . . (i) modify . . . (ii) delete[or] (iii) permanently block the reporting of that item of information [to the CRAs].”

Id. (quoting 15 U.S.C. § 1681s-2(b)(1)). “These duties arise only after the furnisher receives notice of dispute from a CRA; notice of a dispute received directly from the consumer does not trigger furnishers' duties under subsection (b).” Id. “The FCRA expressly creates a private right of action for willful or negligent noncompliance” with these requirements. Id.

A claim under 15 U.S.C. § 1681s-2(b) requires a plaintiff “to plead the following four elements to state a claim against a credit furnisher: (1) a credit reporting inaccuracy existed on plaintiff's credit report; (2) plaintiff notified the consumer reporting agency that plaintiff disputed the reporting as inaccurate; (3) the consumer reporting agency notified the furnisher of the alleged inaccurate information of the dispute; and (4) the furnisher failed to investigate the inaccuracies or further failed to comply with the requirements in 15 U.S.C. 1681s-2(b)(1)(A)-(E).

Heras v. Nelnet, Inc., Case No. CV 16-6388 FMO (PLAx), 2017 WL 4586334, at *5 (C.D. Cal. April 28, 2017) (quoting Moses v. Experian Info. Sols., Inc., 2016 WL 3670068, *2 (N.D. Cal. 2016)). There is no dispute here as to elements two and three. The dispute here focuses on elements one and four.

         As to the first element, “‘[a]n item on a credit report can be . . . inaccurate . . . because it is patently incorrect, or because it is misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.'” Drew v. Equifax Information Services, LLC, 690 F.3d 1100, 1108 (9th Cir. 2012) (quoting Carvalho v. Equifax Info. Svcs., LLC, 629 F.3d 876, 890 (9th Cir. 2010)). Other circuits have held “that a § 1681s-2(b) claim requires [a] plaintiff to show actual inaccuracies that a furnisher's objectively reasonable investigation would have been able to discover.” Chiang v. Verizon New England Inc., 595 F.3d 26, 29-30 (1st Cir. 2010) (emphasis added). But, in the Ninth Circuit, “a consumer report that contains technically accurate information may be deemed ‘inaccurate' if the statement is presented in such a way that it creates a misleading impression.” Gorman, 584 F.3d at 1163 (citation omitted).

         Defendant argues that its reporting was accurate. As explained by defendant's expert, defendant reported plaintiff's information to the CRAs “using a language called ‘Metro.' Metro, now Metro-2, is the credit industry standard reporting language.”[43] Using the Metro language and codes, defendant reported the following:

the Account Status field was reported with code “97.” Code 97 indicates the account is charged off. The Portfolio Type field was reported with code “I.” Code I indicates the account is an installment account. The Account Type field was reported as “00.” The 00 code indicates the account is an auto loan. The Payment History field was reported with code “L.” Code L indicates the loan was charged off previously. The Special Comment Code was reported with code “BK.” Code BK indicates “Involuntary repossession with a balance owing.” The Date of 1st Delinquency was reported with the date “04152015.” The ECOA field was reported with code “1.” Code 1 indicates the account was an “individual” account, meaning only the Plaintiff was liable for the debt associated with the subject MACU loan.[44]

         Both defendant's expert[45] and plaintiff's expert[46] have confirmed that this information was accurate.

         But even if defendant's reporting was technically accurate, which it may have been, plaintiff argues that it was inaccurate for purposes of the FCRA because it was misleading. Plaintiff contends that defendant's reporting was misleading because both defendant and FAI, at the express direction of defendant, were reporting a balance due. Plaintiff contends that this double reporting increased the number of derogatory accounts as well as the amount of total debt on his credit report. Plaintiff argues that this double reporting created the impression that he had two debts totaling $27, 303, rather than a single debt of $13, 651. Plaintiff argues that because most credit decisions are the result of automated processes, both defendant's and FAI tradelines would have been interpreted as a negative item on his credit report, and not as a single negative item.

         Plaintiff relies on the testimony of his expert, Thomas Tarter, for support of his argument that this type of “double reporting” is inaccurate in that it is misleading in such a way that it could be expected to adversely affect credit decisions. Tarter opined that “[e]ffectively duplicate negative reporting results in creating the illusion that a person's credit is worse than what it should be such as distorting the amount owed, amplifying the debt to available credit ratio, and the debt to income ratio.”[47] Tarter opined that

that [d]efendants duplicate negative reporting created a ‘double whammy' giving the illusion [plaintiff] had two large charge offs from two different creditors that approximated $13, 000. To me, that is just not fair, reasonable and/or equitable nor is it consistent with credit industry standards.[48]

         Defendant's expert disagrees. Ulzheimer, defendant's expert, opines that “it is common and standard for original creditors, like [defendant], to continue reporting to the credit reporting agencies even after they have assigned a debt to a 3rd party debt collector.”[49] Defendant contends that plaintiff has no authority to support his double reporting theory.[50] Defendant acknowledges that Tarter opined that “there is an absolute standard in the credit reporting industry, ‘One debt, one tradeline.['] In other words, each debt becomes reported as its own tradeline on a consumer's credit record, but double-reporting a single debt as two distinct tradelines is positively beneath industry standards.”[51] But, defendant argues that Tarter has no support for his contention that this is the industry standard. When asked at his deposition whether this “absolute standard [had] ever been reduced to writing[, ]” Tarter responded, “I have not seen it.”[52]

         Defendant also argues that this case does not involve “double reporting” as that term is understood in the credit reporting industry. In his expert report, Ulzheimer states that “[t]he ‘duplicate account' moniker, as it pertains to credit reporting is appropriate only when the furnisher of information . . . furnishes the same account more than one time, thus causing it to show up more than one time on a consumer's credit report.”[53] Defendant argues that if there had been “double reporting” in this case, then there would have been two MACU tradelines on plaintiff's credit report, which there is not.

         Defendant insists that there is nothing misleading about both FAI and it reporting the deficiency balance. Defendant's expert opined that the FAI “reporting clearly indicates that they are collecting a debt on behalf of [defendant] as a result of a deficiency balance from [p]laintiff's repossession.”[54] Thus, defendant argues that these two tradelines would not be interpreted as two separate debts, as plaintiff contends.

         This is not a case of double reporting by a furnisher, but because the two tradelines reported a different balance for a different reason with a different account number, it is possible that someone reviewing plaintiff's credit report would interpret the two tradelines as reporting different debts. This is partly due to the fact that while the FAI tradeline indicates that it is collecting a debt for defendant, it does not indicate that it is collecting the debt, i.e., the deficiency balance. And, while defendant's expert opined that “no competent lender would be misled by [defendant's] credit reporting as being an incremental debt or that [p]laintiff is somehow liable for the same debt twice, ”[55] it is not always “competent lenders” who are making credit decisions.

         Defendant relies on the answers to emails it received from the Metro 2 Task Force in support of its argument that its reporting was compliant with industry standards and thereby could not be considered misleading. This reliance is misplaced. Defendant

asked the CDIA's[56] Metro 2 Task Force, “if an account is sent to a 3rd party collection agency, but the balance remains due to our (MACU) financial institution, is it appropriate for us to report the account to the CRA's alongside the 3rd party collector? Currently we are reporting account status 93 when we send (an account) to a 3rd party for collections. However, we have received complaints that the collection agency is reporting the balance as well, which results in the same balance being reported twice on the consumer's credit.”[57]

         Status 93 is “Account seriously past due/Account assigned to attorney, collection agency or credit grantor's internal collection department[.]”

The response from the CDIA was, “It is appropriate to continue reporting Account Status 93 on accounts that are being worked by a 3rd party collection agency. While this may appear as double reporting to the consumer, you have an obligation as the data furnisher to accurately report the account standing ...

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