A District Court judge in Pennsylvania has denied a defendant’s motion to dismiss a Fair Credit Reporting Act lawsuit, ruling the plaintiff plausibly alleged that the defendant failed to reasonably investigate a disputed 30-day delinquency and that the inaccurate reporting caused the denial of his home equity application.
The background: The plaintiff leased a car through the defendant and, two years ago, traded in the vehicle for a new lease, with the original account paid off to a zero balance within days.
- A few months later, the plaintiff discovered the paid-off account was still being reported as open. After he complained, a supervisor for the defendant acknowledged the error and closed the account, but the tradeline then showed a 30-day delinquency for the very month the account was satisfied.
- The plaintiff, representing himself, filed a demand for arbitration under the lease agreement and paid his share of the fees, but the arbitration case was closed after the defendant failed to pay its portion, sending the dispute to federal court instead.
- The delinquency was removed from the plaintiff’s credit reports early last year, only to reappear a few months later, with the credit reporting agencies listing it inconsistently. Formal disputes produced three different outcomes: one agency removed the delinquency, another deleted the tradeline entirely, and a third verified it as accurate based on information provided by the defendant.
- Last summer, the plaintiff applied for a $140,000 home equity line of credit at roughly 95% loan-to-value. His lowered credit score placed him in a “B-tier” classification that capped his loan-to-value ratio at 85%, and the application was denied. A reconsideration request with the same credit score, credit report, and appraisal, seeking only 85%, was approved.
- The judge previously dismissed part of the case because the lender’s denial letter cited “value or type of collateral not sufficient,” which appeared to contradict the plaintiff’s theory. The plaintiff amended his complaint to explain that the collateral was deemed insufficient only because his credit tier imposed the lower loan-to-value cap.
The ruling: Judge John Gallagher of the District Court for the Eastern District of Pennsylvania denied the motion to dismiss, ruling the amended complaint cured the deficiencies he had previously identified.
- The plaintiff alleged that the defendant’s own records reflected timely payments for the period it reported as delinquent, yet the defendant verified the delinquency as accurate after being notified of the dispute. Taken as true, the judge wrote, those allegations supported a plausible inference that the investigation was unreasonable.
- On causation, the judge accepted the plaintiff’s explanation that the inaccurate reporting “directly affected Plaintiff’s credit score, which determined his credit tier, which dictated the loan-to-value limitation, which resulted in denial at the requested level and materially less favorable loan terms.”
- The judge noted the denial letter did not contradict that theory, because the same collateral could have been sufficient for an applicant in a higher credit tier.
