A District Court judge in California has granted a defendant’s motion for summary judgment over claims it violated the Fair Debt Collection Practices Act, but denied motions that it is entitled to the bona fide error defense while also ruling the plaintiff has standing to pursue claims the defendant violated state law.
The background: The plaintiff originally leased an apartment with two roommates. After executing a roommate‐release agreement absolving him of liability, the plaintiff discovered his name remained on the debt when it was placed for collection with the defendant in January 2022.
- Upon the plaintiff’s dispute, the defendant marked the account as “recalled” in its software, which should have removed him from all future reporting to consumer reporting agencies. Instead, a collection manager selected the improper “Close Account” work action, rather than the “Close Debtor” function, causing the account status “paid in full for less than the full balance” to be reported for the plaintiff alongside the roommates who were responsible for the debt.
- The inaccurate tradeline remained on the plaintiff’s credit reports through late August 2022. When the plaintiff applied for a home‐equity line of credit and later a mortgage, the adverse entry appeared in his file. Only after filing credit disputes in November 2023 did the defendant request deletion of the tradeline.
The ruling: Judge William Q. Hayes of the District Court for the Southern District of California granted summary judgment in favor of the defendant on the plaintiff’s sole federal claim under the FDCPA, concluding that the alleged conduct did not survive statutory and procedural defenses.
- However, Judge Hayes rejected the defendant’s invocation of the bona fide error defense, finding that the software‐driven “procedures” were not documented in writing and that testimony based on unwritten workflow steps was admissible. As the court observed, “[t]here was no reason for this to be done, other than a human error by selecting ‘Close Account’ instead of ‘Close Debtor.’”
- Finally, Judge Hayes held that the plaintiff had Article III standing to pursue his remaining state-law claims under the California Consumer Credit Reporting Agencies Act, noting that potential economic damages, such as increased mortgage interest rates and attorneys’ fees, easily satisfied the jurisdictional threshold for standing.
