A District Court judge in New York has agreed with a Magistrate Court judge and dismissed a Fair Credit Reporting Act case filed against a creditor by a sovereign citizen who claimed the defendant reported his account as delinquent even though he used a “security interest” to make a payment.
The background: The plaintiff opened two credit card accounts with the defendant and later attempted to satisfy his balance by mailing paperwork that purported to invoke a “security interest” to set off the debt.
- After the defendant declined the payment method and closed the accounts for activity that violated its customer agreement, the plaintiff filed suit in state court.
- The case was removed to federal court, where the plaintiff sought to amend his complaint to add claims under the FCRA, along with other theories.
- Central to the plaintiff’s FCRA claims was the assertion that his account should not have been reported as delinquent or charged off because he had tendered lawful payment through a bill of exchange and related documents.
The ruling: Judge Ramon E. Reyes, Jr., of the District Court for the Eastern District of New York adopted the Magistrate Judge’s recommendation and dismissed the FCRA claim as futile.
- Judge Reyes emphasized that credit reporting is only inaccurate if the underlying information is factually wrong. Here, the plaintiff’s debt was never actually paid.
- As the judge noted, “One cannot pay a debt by writing ‘pay to the bearer’ and ‘accepted’ on a piece of paper,” and a credit card payment stub or similar document is not legal tender. Because the balance remained unpaid, reporting the account as delinquent or charged off was accurate.
- Judge Reyes also rejected the plaintiff’s reliance on Uniform Commercial Code provisions, explaining that those rules do not transform a payment coupon or homemade instrument into valid currency.
