Banking and Finance Law Daily Consumer describes credit reporting violations arising from mortgage dispute
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Wednesday, November 13, 2019

Consumer describes credit reporting violations arising from mortgage dispute

By Richard A. Roth, J.D.

A consumer will be given an opportunity to prove that JPMorgan Chase Bank violated the Fair Credit Reporting Act in the process of reporting his delinquent mortgage to credit reporting agencies. However, his FDCPA claim was rejected.

JPMorgan Chase Bank might have failed to investigate a consumer’s dispute over a mortgage delinquency noted in his credit report, and the bank also might have violated Fair Credit Reporting Act provisions about whether it could pull his consumer report and how it could do so, the U.S. Court of Appeals for the Eleventh Circuit has decided. The appellate court reversed an order dismissing the FCRA claims, but it affirmed the rejection of a claim that the bank wrongfully used a false name in attempting to collect the debt (Pinson v. JPMorgan Chase Bank, N.A., Nov. 12, 2019, Martin, B.).

In the process of its analysis, the court considered two FCRA issues for the first time in the Eleventh Circuit:

  1. What is the standard for determining whether a creditor’s use of a different name would indicate that a third party was collecting a debt?
  2. What could constitute obtaining a credit report under false pretenses?

The consumer, who was unrepresented in the trial court, was unhappy with the appearance on his credit report of a claimed overdue mortgage account at Chase Home Finance LLC. According to the consumer, his admittedly past due mortgage was owed to JPMorgan Chase Bank, N.A. Over the course of four years, he sent letters both to JPMorgan Chase and TransUnion to dispute the entry. The consumer said that TransUnion repeatedly refused to remove or change the entry.

The bank never investigated his dispute, the consumer said. However, it obtained his credit report from Experian more than 20 times without a proper purpose for doing so.

Consumer’s suit. The consumer eventually sued the bank, asserting violations of both the FCRA and the Fair Debt Collection Practices Act. The FCRA violations consisted of failing to investigate the accuracy of the information the bank provided TransUnion and obtaining his credit reports without a proper purpose and under false pretenses. The FDCPA violation was the bank’s use of an assumed name in connection with the collection of a debt.

The U.S. district judge dismissed all of the claims.

Standing to sue. The first question the appellate court had to consider was whether the consumer had described an injury in fact that gave him standing to sue. The court concluded he had satisfied the requirement of describing actual, concrete, particularized injuries.

The consumer complained that in his effort to rectify the claimed inaccuracy, he been required to spend time communicating with both the credit reporting agency and the bank and had incurred out-of-pocket expenses. He also was denied access to credit and was charged higher car insurance premiums because of the information in the credit report.

According to the court, time spent in an effort to correct an incorrect credit report entry was enough to be a concrete injury. The claimed economic harm "is a quintessential injury in fact," the court added.

Putting inaccurate information in a credit report is closely related to the common law cause of action for publishing defamatory information, the court said. That also argued that an injury in fact existed.

FDCPA claim. The FDCPA says that a debt collector may not make misrepresentations while collecting a debt. That includes a business’s use of any name other than its "true name" in connection with the collection of a debt it owns (15 U.S.C. 1692e(14)). According to the consumer, JPMorgan Chase violated the ban when it reported the mortgage debt was owed to Chase Home Finance.

The court first decided that the "least sophisticated consumer" standard was the proper benchmark for deciding whether a consumer would believe that a debt was being collected by a third party rather than by the creditor. That standard already was in use for other FCRA sections, and there was no need to adopt a different standard for the true-name section.

Based on that, the consumer’s claim was rejected because he had failed to describe a misrepresentation that would have misled the least sophisticated consumer. "[E]ven the least sophisticated consumer would understand that JPMorgan Chase and Chase Home Finance were related entities collecting his mortgage with JPMorgan Chase bank," the court said.

The court explicitly rejected "bright-line" rules proposed by the two sides. The FDCPA did not require a creditor to use precisely the same name throughout its relationship with a consumer, but neither did it allow a creditor to use any name as long as that name included any part of the creditor’s true name. The least sophisticated consumer standard did not permit either rule.

FCRA claims. On the other hand, the consumer had alleged facts that could show JPMorgan Chase willfully failed to comply with its obligation to investigate the accuracy of the information it provided to TransUnion, the court decided.

Under the FCRA, a credit reporting agency, like TransUnion, must transmit any consumer dispute about the accuracy of a report to the person who provided the challenged information. The consumer claimed he disputed the information with TransUnion three times, but the bank never investigated the dispute. Three failures could imply a reckless disregard of the investigation duty, the court noted.

The FCRA says that a person can obtain a consumer’s credit report only for a purpose described specifically in the Act. The consumer claimed that JPMorgan Chase obtained his report for use in litigation, and that arguably was not a permissible purpose. Again, the violation could have been willful, the court added.

It was true that JPMorgan Chase claimed that it pulled the consumer’s credit report in connection with collecting the overdue mortgage loan. That would be a permissible purpose, the court conceded, but in the context of a motion to dismiss only the consumer’s allegations were to be considered.

The Act also says that obtaining a consumer report under false pretenses is a violation. Addressing the issue for the first time in the Eleventh Circuit, the court said that "intentionally obtaining a credit report under the guise of a permissible purpose while intending to use the report for an impermissible purpose can constitute false pretenses."

The case is No. 16-17107.

Attorneys: Ashwin Pradyumna Phatak, Constitutional Accountability Center, for John Pinson. Andrew B. Boese (Leon Cosgrove, LLP) for JP Morgan Chase Bank, National Association.

Companies: Chase Home Finance LLC; Experian; JPMorgan Chase Bank, N.A.; TransUnion

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