Failure to Mark Tradeline “Disputed” is a Violation of the FCRA

Hrebal v. Nationstar Mortgage LLC

Case No. 17-cv-1815; D. Minn., June 14, 2019

The U.S. District Court granted summary judgment for the Plaintiff on a motion for reconsideration on the ground that the mortgage company negligently violated the Fair Credit Reporting Act when it repeatedly failed to report the consumer’s account as “disputed” in responses to the at-issue ACDV’s.

The Court determined that there are no material factual disputes for a jury to resolve with respect to liability: the FCRA imposes liability on “furnishers” of consumer credit information, like Mr. Cooper, who fail to report that a loan delinquency is “disputed,” is a “reasonable investigation” could have uncovered that a borrower’s dispute with that delinquency was “bona fide” or ‘potentially meritorious.” This is so because reporting that a delinquency is, in fact, disputed may be necessary to prevent the dissemination of “materially misleading” consumer credit information.

In this case, it was undisputed that Mr. Cooper received at least three official dispute notifications, that Mr. Cooper never reviewed his pre-2014 servicing notes and gleaned that the Plaintiff’s dispute stemmed from a legitimate and longstanding “proof of claim” error, that Mr. Cooper confirmed the Plaintiff’s delinquency three times in a confusing and inconsistent manner, and that this reporting gave the impression that the Plaintiff had fallen behind on his mortgage immediately after his bankruptcy when, in fact, he had not missed a payment in over five years.

The Court cited four recent case decisions that also granted summary judgment for the Plaintiff on the under the “failure to report a debt as disputed” theory. Those Courts found that a “reasonable investigation” would have uncovered that the consumer’s dispute was, at the least, “bona fide”, the furnisher needed to mark the debt as “disputed.” The Court cited Saunders v. BB&T (4th Circuit), which found that “a disputed debt differs materially from an undisputed debt even if the consumer would not succeed at a trial of the dispute.”