Handrock v. Ocwen Loan Servicing, LLC. et al, No. 1:2016cv05732 - Document 43 (N.D. Ill. 2016)

Court Description: MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 11/1/2016:Mailed notice(wp, )
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Handrock v. Ocwen Loan Servicing, LLC. et al Doc. 43 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHER DISTRICT OF ILLINOIS EASTERN DIVISION ALAN HANDROCK and CAROLYN MARY HANDROCK, Plaintiffs, Case No. 16 C 5732 Case No. 16 C 5733 v. Judge Harry D. Leinenweber OCWEN LOAN SERVICING, LLC And EXPERIAN INFORMATION SERVICES, INC., Defendants. MEMORANDUM OPINION AND ORDER Before the Court is Defendant Experian Information Solutions, Inc.’s Motion to Dismiss the Complaint pursuant to FED. R. CIV. P. 12(b)(6). [ECF No. 27]. For the reasons stated herein, the Motion is denied. I. The following facts BACKGROUND are contained Complaints and attached exhibits. in the Plaintiffs’ They are presumed true for purposes of deciding the motion to dismiss. See, Forrest v. Universal Sav. Bank, F.A., 507 F.3d 540, 542 (7th Cir. 2007). Husband and wife Alan and Carolyn Mary Handrock, Plaintiffs in this consolidated case (hereinafter, “Plaintiffs” “Handrocks”), filed for bankruptcy on April 20, 2013. the debts involved in their bankruptcy was a or One of mortgage loan Dockets.Justia.com secured by Servicing, Experian the LLC couples’ (“Ocwen”) Information reporting agency, residence. serviced Solutions, maintained and Defendant the Inc. loan, Ocwen while (“Experian”), reported Defendant a information loan as part of Plaintiffs’ credit history. Loan credit on the In their bankruptcy plan, Plaintiffs proposed to surrender the residence and thereby extinguish Ocwen’s claim against them. The Bankruptcy Court confirmed the Plaintiffs’ plan on June 28, 2013. Eleven months later, on May 28, 2014, the court entered an Order of Discharge in Plaintiffs’ case. Plaintiffs thereafter sent credit dispute letters to Experian. They requested that Experian update their credit files to reflect that their debts had been discharged through bankruptcy and to report a zero current balance on those debts. In responding to the letters, Experian generated and mailed to Plaintiffs a report that is one of three reports underlying Plaintiffs’ claim in this case. The report showed that the Ocwen account has a balance of $0.00 as of June 2014, that the status of the account was “Discharged through Bankruptcy Chapter 7,” and that the Account History stated “Debt included in Chapter 7 Bankruptcy on May 28, 2014.” See, Alan Handrock v. Ocwen, 16 C 5732, ECF No. 1 (“Compl.”), Ex. I (“First Report”). However, the month-by-month Account History showed a scheduled payment amount of $1,525.00 for each of the months from April - 2 - 2013 to April 2014, or the period from when Plaintiffs first filed for bankruptcy to the month before the Discharge Order was entered. The Payment History section also showed the number 180 under each month from September 2013 to April 2014, presumably reflecting that the account was more than 180 days overdue during this time. Plaintiffs claim that the report was inaccurate. to Plaintiffs, the Ocwen account should have According reported “the status of the subject loan without a negative payment history for the months following Plaintiff’s bankruptcy filing.” ¶ 33. Compl. This is because “Ocwen could no[t] collect payments for the subject loan after Plaintiff’s bankruptcy filing in April 2013.” Id. Furthermore, “Plaintiff no longer had any personal liability for the balance of the subject loan” after his and his wife’s bankruptcy plan was confirmed on June 28, 2013. Id. Some six months later, the Plaintiffs sent Experian yet another pair of dispute letters, this time disputing the accuracy of the Ocwen account. them back an updated report. specifically Experian mailed This report contained the same scheduled payment and 180 days past due information on the Ocwen account as did the First Report. See, ECF No. 1, Ex. K (“Second Report”). Alan credit Handrock report on (“Alan”) obtained February 15, - 3 - 2016. a copy See, of his Ex. L personal (“Third Report”). This report contained two tradelines for the same Ocwen loan, one of which Plaintiffs say is correct. The second tradeline, however, reported a recent balance of $192,392.00 and a monthly payment of $1,526.00. Ex. L. See, Compl. ¶¶ 43, 44 and It also reported a past due amount of $66,120.00 as of December 2015, more than a year after Plaintiffs’ bankruptcy discharge, and a notation of “180 days past due as of Dec. 2015, Nov. 2015.” Id. Alan alleges that this credit report is inaccurate and that around March 10, 2016, he was “denied credit as a result of the inaccurate credit reporting.” Carolyn Handrock (“Carolyn”) makes a similar complaint. Like Alan, Carolyn alleges that she was denied credit, although in her case this was a denial of a Capital One credit card around October 26, 2014. Plaintiffs Ocwen, bring claiming that this the lawsuit against Defendants Credit Reporting Act (“FCRA”). have both Experian violated the and Fair Plaintiffs seek actual damages to compensate them for “loss of credit, increase in the price of credit, out-of-pocket expenses associated with writing dispute letters, sending certified mail, time meeting with [their] attorneys and monitoring [their] credit file, as well as mental and emotional pain and suffering.” also pray for injunctive monetary compensation. relief Compl. ¶ 49. alongside Compl. ¶¶ 74, 97. - 4 - other Plaintiffs forms of II. ANALYSIS Plaintiffs allege sections of the FCRA. that Experian violated two separate The first, 15 U.S.C. § 1681e(b), requires a consumer reporting agency like Experian to “follow reasonable procedures to assure maximum information it reports. possible accuracy” of the This provision is operative whenever a reporting agency “prepares a consumer report.” In contrast, the second provision, 15 U.S.C. § 1681i, is relevant only during “reinvestigations”; it provides steps that a reporting agency must take disputing after “the a consumer notifies completeness or the accuracy agency of that is item an[] he of information” contained in the consumer’s credit file. See, 15 U.S.C. § 1681i(a)(1)(A) and 15 U.S.C. § 1681i generally. Experian Plaintiffs argues have not that Plaintiffs’ pled the Complaint existence of (1) fails an because actionable inaccuracy on a consumer credit report; (2) a consumer credit report; or (3) actual damages. The Court considers each of these arguments in turn. A. To state Plaintiffs a must Inaccurate Information claim under allege that inaccurate information. either their § 1681e(b) credit or reports § 1681i, contained See, Henson v. CSC Credit Servs., 29 F.3d 280, 284 (7th Cir. 1994) (“In order to state a claim under 15 U.S.C § 1681e(b), a consumer must sufficiently allege that a - 5 - credit reporting agency prepared a report containing ‘inaccurate’ information.”) (internal quotation marks omitted); DeAndrade v. Trans Union LLC, 523 F.3d 61, 67 (1st Cir. 2008) (“[W]ithout a showing that the reported information was in fact inaccurate, a claim brought under § 1681i must fail.”); and Hanson v. Experian Info. Sols., Inc., No. 10 C 2022, 2012 U.S. Dist. LEXIS 11450, at *7 (N.D. Ill. Jan. 27, 2012) (following DeAndrade). See also, Bagby v. Experian Info. Sols., Inc., 162 F. App’x. 600, 603 (7th Cir. 2006) (“The FCRA was enacted to protect consumers from the transmission of inaccurate information.”). Experian contends that its reports of Plaintiffs’ nonpayments to the Ocwen account are not actionable inaccuracies under the FCRA. the information In making this argument, Experian distinguishes shown on the first two reports from that displayed on the last report. 1. First Two Reports The first two reports showed that Plaintiffs did not make payments during the interim of their filing for bankruptcy and the entry of the Discharge Order. Experian calls these “pre- discharge delinquencies” and claims that they cannot sustain an FCRA claim. Plaintiffs, on the other hand, argue that these reports were generated after their bankruptcy discharge, and as such, any information on them that suggests Plaintiffs still owe - 6 - the debt post-discharge is false or misleading and renders the report inaccurate under the FCRA. The issue before the Court is thus whether post-discharge reporting of pre-discharge “inaccurate” information under delinquencies the FCRA. constitutes While there is no controlling authority on this point, the Court finds Hupfauer v. CitiBank, N.A., No. 16 C 475, 2016 U.S. Dist. LEXIS 112227 (N.D. Ill. Aug. received 19, a 2016) persuasive. bankruptcy discharge, In Hupfauer, sent a the dispute plaintiff letter to Experian, and received back an “investigation report” showing that one of her accounts was past due during the months after her bankruptcy filing but before her discharge. She then sued Experian, Plaintiffs bring counsel that in Handrocks here). Chief Judge against Experian. *23. here case alleging (perhaps is the same all of the same unsurprising law firm Id. at *1-5. as claims as Hupfauer’s representing the Id. at *5. Rubén Castillo dismissed Hupfauer’s case Hupfauer, 2016 U.S. Dist. LEXIS 112227 at The judge concluded that Experian’s investigation report was “factually accurate.” Id. at *11-12. Hupfauer, just as the report showed, “did not make any payments on the Citi account within 150 or 180 days of February or March 2014.” Id. The fact that Hupfauer filed for bankruptcy and had her bankruptcy plan confirmed before February 2014 did not change her account - 7 - conditions as they existed prior to her discharge. Id. at *12- 14. This case is identical to Hupfauer’s as far as the first two reports are concerned. Plaintiffs, like Hupfauer, do not allege that they made payments to Ocwen during the time between their bankruptcy filing and discharge. Instead, they, like Hupfauer, make the legal argument that Experian should not have reported a balance due, monthly payment, or delinquency for the months following the filing or confirmation of their bankruptcy plan. Judge Castillo rejected the argument in Hupfauer, and his is not the only court to have done so. See, Mortimer v. Bank of Am., N.A., No. C-12-01959 JCS, 2013 U.S. Dist. LEXIS 51877, at *10, 25-32 (N.D. Cal. Apr. 10, 2013) (collecting cases to reaffirm the position that “the FCRA does not prohibit accurate reporting, after discharge, of debts that were delinquent during the pendency of a bankruptcy action. Whether or not the debt was collectible, the debt existed.”) (internal quotation marks omitted). Plaintiffs have cited no persuasive authority to distinguish Hupfauer. None of the cases from Plaintiffs’ string citation the dealt alleged here. with kind of pre-discharge inaccuracies The Court therefore finds that Plaintiffs have not stated a cognizable FCRA claim insofar as they rely on the first two Experian reports. To - 8 - the extent that Plaintiffs’ claims against Ocwen rest on the same alleged inaccuracies in the two reports, they, too, must fail. 2. The Third from dismissal. stated that as Report, Third Report however, rescues Plaintiffs’ Complaint Unlike the first two reports, the Third Report of December 2015 – a time after Plaintiffs’ discharge – the Ocwen account had a positive balance and was past due. While the report also contained another tradeline on the same Ocwen account and this tradeline was accurate, at least one court in this district has found the duplicate tradeline to be irrelevant complaint in determining the dismissal. survives whether plaintiff’s See, Twomey v. FCRA Ocwen Loan Servicing, LLC, No. 16-cv-0918, 2016 U.S. Dist. LEXIS 111307, at *3-4, 10-13 (N.D. Ill. Aug. 22, 2016). Experian contends that the Third Report does not contain an actionable inaccuracy because “determining whether or not the Ocwen account was in fact discharged, is itself, a legal question, and not one Experian is required to determine under the FCRA.” Experian’s argument thus seems to be that had it known that the Ocwen account was discharged through bankruptcy, it would Handrocks’ not have credit included reports, the but information it required to know under the law. did not it know did and on the was not Experian’s argument is belied by the fact that the credit reporting agency had a duplicate - 9 - tradeline on the same Ocwen account showing that the account was discharged through bankruptcy. So Experian did know the discharged status of the account, and its argument here to the contrary is unavailing. Furthermore, courts in this district consistently have found that the type of post-discharge information included on the Experian report gives rise to a FCRA claim. See, e.g., Twomey, 2016 U.S. Dist. LEXIS 111307 at *3-4, 10-13 (finding that reporting a post-discharge positive balance, past due amount, and a monthly payment obligation states a claim under the FCRA); Jackson v. Experian Info. Sols., Inc., No. 15 C 11140, 2016 U.S. Dist. LEXIS 65846, at *6, 15 (N.D. Ill. May 19, 2016) (denying a motion to dismiss when a report showed a postdischarge scheduled payment amount and payment received); and Asufrin v. RoundPoint Mortg. Servicing Corp., No. 15 C 9077, 2016 U.S. Dist. LEXIS 34420, at *11-12 (N.D. Ill. Mar. 17, 2016) (rejecting the defendant’s argument that there were no inaccuracies when the credit reports reflected that “the subject debt had an account balance and a scheduled payment amount for March 2015 and discharged”). Experience with April See the 2015, after also, Fed. Fair Credit Trade the subject Comm’n, Reporting Act 40 debt was Years (July 2011), available at https://www.ftc.gov/sites/default/files/documents/ - 10 - of reports/40-years-experience-fair-credit-reporting-act-ftc-staffreport-summary-interpretations/110720fcrareport.pdf (stating that for a debt discharged in bankruptcy, a consumer report must “report[] a zero balance to reflect the fact that the consumer is no longer liable for the discharged debt”). Judge Castillo is no exception in this case, having found that a post-discharge scheduled payment is plausibly inaccurate under the FCRA. See, Freedom v. CitiFinancial, LLC, No. 15 C 10135, 2016 U.S. Dist. LEXIS 97533, at *4-5, 19-20 n.5 (N.D. Ill. July 25, 2016). Experian raises one more argument with regards to the Third Report. this that Relying on the fact that Plaintiffs have not disputed report before Plaintiffs commencing therefore their have lawsuit, not Experian triggered argues Experian’s reinvestigation duties as laid out in § 1681i. It is true that Plaintiffs did not write Experian another dispute letter after obtaining their own copies of their credit reports. bankruptcy However, Plaintiffs had notified Experian of their discharge twice and specifically disputed accuracy of the Ocwen account prior to filing suit. the Experian informed the Handrocks both times that “the Ocwen account was updated to show it was included in bankruptcy.” 32, 39-40. Compl. ¶¶ 31- Yet the Ocwen tradeline complained of from the Third Report, among other inaccuracies, did not mention the bankruptcy discharge at all. Under such circumstances, - 11 - the Handrocks should not be required to write to Experian yet again before being allowed to bring suit. The sole case cited by Experian in support of its argument does not suggest otherwise. In Ruffin-Thompkins v. Experian Info. Sols., Inc., 422 F.3d 603, 606, 608 (7th Cir. 2005), the Seventh Circuit found that a purported dispute letter did not trigger § 1681i’s obligations when the letter included an incomplete form with requested information lines left blank. In such a situation, the credit reporting agency may determine that the complaint is frivolous and so not begin a reinvestigation. Id. 608. any That is not the situation here. point imply that the Handrocks’ Experian did not at dispute letters were incomplete or that their dispute was frivolous. In sum, the Court finds that the First and Second Report do not contain inaccurate information but the Third Report plausibly does and so states a claim under 15 U.S.C. § 1681e(b) and 15 U.S.C. § 1681i. B. Disclosure of Information to a Third-Party In addition to pleading inaccurate information, plaintiffs looking to recovery allegations that communicated to under the a third the inaccurate party. FCRA must credit This is make plausible information because was without disclosure to a third party “there cannot be a consumer report” and “[w]ithout such a report, there could be no duty to follow - 12 - reasonable procedures regarding the report, nor could damages flow from a breach of that duty.” Wantz v. Experian Info. Sols., 386 F.3d 829, 833-34 (7th Cir. 2004), abrogated on other grounds by Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 56 (2007). Experian argues that Plaintiffs have not plausibly alleged that the reports they complained of were disclosed to any third parties besides themselves. alleged that threadbare they were allegation In particular, although Plaintiffs denied . . . credit, [and] no they offered reason to “only think a that Experian actually provided a credit report bearing inaccurate information to any third parties.” However, it is reasonable to infer that companies that denied Plaintiffs credit viewed their credit reports before making the decision. This is common business practice and indeed, the reason for the existence of credit reporting Experian, agencies Experian (Oct. such as 31, Experian. 2016), See, available About at http://www.experian.com/corporate/about-experian.html. See also, Geinosky v. City of Chi., 675 F.3d 743, 745 n.1 (7th Cir. 2012) (allowing for consideration of information subject to judicial notice in deciding a Rule 12(b)(6) motion). Further, even though the Third Report may have been “prepared exclusively for, and sent exclusively to, Plaintiff[s],” as Experian asserts, the information on it was presumably available to any party that - 13 - obtained Plaintiffs’ credit reports. All Plaintiffs need is to gather evidence to show that a company that denied them credit obtained such an Experian credit report before doing so. This, the Court reasonably expects that Plaintiffs will be able to do in the course of discovery. The Court therefore declines to dismiss their Complaint at this point. See, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (holding that a complaint only needs to allege “enough fact to raise a reasonable expectation that discovery will reveal evidence” supporting the plaintiff’s claim). C. Experian contends Damages that Plaintiffs have alleged that they suffered actual damages. not plausibly However, because Plaintiffs here are seeking other remedies, including injunctive relief, the case may proceed even if they did not adequately plead actual damages. F.3d 662, 664 (7th See, Crabill v. Trans Union, L.L.C., 259 Cir. 2001) (stating that even where a plaintiff cannot obtain an award of actual damage, he may still “obtain any other remedy, such as an injunction”). Moreover, actual Plaintiffs damages. have Experian plausibly calls stated Plaintiffs’ a claim for allegations of actual damages “boilerplate,” but merely because something is not creatively pled does not mean that it fails. set of facts exists under which - 14 - Plaintiffs can A plausible show that a company that denied them credit viewed an Experian credit report containing inaccurate information on the Ocwen loan before doing so. This would establish a “causal relation between the violation of the statute and the loss of credit” and entitle Plaintiffs to recover actual damages. 422 F.3d at 609 n.2. See, Ruffin-Thompkins, Similarly, Plaintiffs may be able to meet the “strict standard” for proving emotional damage by either providing proof of medical costs incurred or explaining circumstances of their distress in reasonable detail. the Id. In sum, dismissal of Plaintiffs’ Complaint is improper at this point. III. For the reasons CONCLUSION stated herein, Defendant Experian Information Solutions, Inc.’s Motion to Dismiss [ECF No. 27] is denied. IT IS SO ORDERED. Harry D. Leinenweber, Judge United States District Court Dated: November 1, 2016 - 15 -