A District Court judge in Illinois has partially granted a defendant’s motion to dismiss a Fair Credit Reporting Act class action lawsuit over a credit report that allegedly omitted any mention of a consumer’s mortgage loan modification, ruling that the plaintiff’s reasonable reinvestigation and willfulness claims can move forward while dismissing his reasonable procedures claim.
The background: The plaintiff entered into a COVID forbearance agreement on his mortgage in 2020.
- As the forbearance neared its end, the plaintiff advised his mortgage servicer that he would have difficulty making payments, and the two sides agreed to a loan modification requiring reduced payments for three months, after which the modification would become permanent.
- The plaintiff made all three reduced payments, but the servicer allegedly began reporting him as 30, 60, and 90 days late during that trial period.
- The plaintiff noticed the reporting while applying for credit and disputed the debt with the servicer and with the defendant, a credit reporting agency. The servicer allegedly confirmed to the defendant that the plaintiff had met his obligations under the modification, yet the defendant continued reporting him as delinquent without any reference to the trial period or the modification.
- Another credit reporting agency also reported the late payments, but included a note that the plaintiff was paying under an agreed partial payment plan.
- After a subsequent credit application was denied based on a report reflecting the missed payments, the plaintiff filed suit, accusing the defendant of failing to follow reasonable procedures to assure maximum possible accuracy and failing to conduct a reasonable reinvestigation.
The ruling: Judge Mary M. Rowland of the District Court for the Northern District of Illinois granted the motion as to the reasonable procedures claim but allowed the reinvestigation and willfulness claims to proceed.
- Courts in the district are split on whether the reasonable procedures requirement applies only before a consumer disputes a report or also covers what happens afterward. On that question, Judge Rowland wrote that the defendant “has the right of it”: the provision covers only pre-dispute conduct, while post-dispute conduct is measured under the reinvestigation requirement.
- The judge noted that omitting the trial period plausibly made the report inaccurate, since the Seventh Circuit has held that “a credit report that omits a [trial period plan] is not accurate,” but the defendant was entitled to rely on the information it received from the servicer before any dispute was raised.
- The reinvestigation claim survived because the defendant’s only argument against it was that the report was accurate, which the judge had already rejected.
- The judge declined to dismiss the willfulness claim, finding that more discovery is needed into what procedures the defendant undertook after receiving the plaintiff’s multiple disputes.
