A Magistrate Court judge in Kentucky has denied a motion to dismiss filed by a bank that is being accused of violating the Fair Credit Reporting Act because the bank allegedly failed to correct reporting that the plaintiffs were late on their mortgage payments after returning payments back to the plaintiffs.
The background: The case originated after the plaintiffs noticed that their mortgage servicer had begun returning multiple monthly payments, stating that they could not be applied. Despite the plaintiffs’ assertion that they had always remained current on their mortgage, the defendant allegedly furnished information to consumer reporting agencies showing 16 late payments.
- The plaintiffs repeatedly contacted the defendant to correct the issue, and the consumer reporting agencies notified the defendant that the plaintiffs disputed the accuracy of the reporting, according to the complaint.
- Even with those notices, the plaintiffs said the reporting was never corrected, prompting claims under the FCRA, along with state-law claims for invasion of privacy and negligent hiring and supervision.
The ruling: Judge Colin H. Lindsay of the District Court for the Western District of Kentucky found that the plaintiffs had alleged enough to move forward on their FCRA claim. Judge LIndsay emphasized that reporting late payments without noting the surrounding circumstances could create “a materially misleading impression,” especially if the payments were returned through no fault of the borrowers. As he put it, omitting these facts could imply “a much greater degree of financial irresponsibility” than what actually occurred.
- Judge Lindsay also highlighted that while the plaintiffs offered limited detail, they alleged they were always current on their mortgage and that the defendant continued to furnish negative information even after notice of dispute. That was sufficient at the motion-to-dismiss stage. The judge cautioned, however, that: “should [the bank] move for summary judgment, the Court will demand more” than the general allegations in the complaint.
- On the willful or negligent violation question, Judge Lindsay noted that the plaintiffs’ allegation that the bank received notices from both them and the consumer reporting agencies was enough to support an inference that the bank knowingly or recklessly failed to meet its investigative duties under Section 1681s-2(b) of the FCRA.
- The plaintiffs’ invasion-of-privacy and negligent-hiring claims did not fare as well. The Court dismissed those counts, noting the absence of any allegation that the bank publicized private information or that any specific employee engaged in conduct tied to the alleged harm.
