United States: Court Determines That CRAs’ Summaries Of Consumers’ Disputes As Part Of Their Automated Reinvestigation Process Were Inadequate For Summary Judgment

Bradshaw v. BAC Home Loans Servicing, LP., 2011 U.S. Dist. LEXIS 110781 (D. Or. Sept. 27, 2011)

Facts: In March 2008, Plaintiffs applied for a home loan modification. Plaintiffs filed suit after encountering problems with the home loan modification process and derogatory information was reported on their credit file. Specifically, there was a dispute about whether Plaintiffs made timely payments pursuant to BAC Home Loans Servicing, LP's ("BAC") instructions while the loan modification was pending. Plaintiffs alleged that they always paid in accordance with BAC's directions yet BAC reported Plaintiffs as delinquent to the consumer reporting agencies ("CRAs").

After Plaintiff settled with BAC and Equifax Information Services, LLC, Defendants Trans Union, LLC and Experian filed motions for summary judgment regarding Plaintiffs' FCRA claims. Plaintiffs alleged that Defendants willfully and negligently failed to comply with the FCRA by (1) failing to follow reasonable procedures under § 1681e(b) and (2) failing to comply with the reinvestigation provisions of § 1681i. Defendants argued that they accurately reported the BAC account or, in the alternative, that Plaintiffs' dispute with BAC regarding the validity of their loan modification was a legal issue that Defendants were not obligated to resolve. The Court denied summary judgment for Defendants on the FCRA claims.

• Summary Judgment. The Court viewed the facts in a light most favorable to Plaintiffs and found that Plaintiffs had presented facts that they entered into a binding modification agreement that enabled them to lower their monthly mortgage payments. Thus, the Court found that a factual dispute existed regarding the accuracy of Plaintiffs' reports.
• Reasonable Procedures. The Court concluded fact issues existed as to whether Defendants had reasonable procedures to assure the maximum possible accuracy of the information associated with Plaintiffs' BAC account solely because Plaintiffs disputed that Defendants' procedures were reasonable.
• Reinvestigation. The Court also found that factual issues precluded summary judgment as to whether a reasonable reinvestigation could have discovered the inaccuracies in Plaintiffs' reports. Defendants used an automated dispute system to verify the accuracy of Plaintiffs' BAC account. The Court noted that the automated consumer dispute verifications ("ACDVs") in this matter listed only general reasons why Plaintiffs were disputing the payment information on their account and did not fully summarize the nature of Plaintiffs' dispute. The Court also stated that the ACDVs did not describe the contents of the documents submitted by Plaintiffs with their dispute letters in a manner that would alert BAC of the alleged inaccuracies. The Court determined that a reasonable jury could infer that Defendants' reinvestigations were unreasonable based on Defendants' exclusive reliance on an automated system and their failure to provide BAC with a detailed summary of Plaintiffs' letters and supporting documentary evidence.
• Emotional Distress. The Court determined that Plaintiffs' allegations that they suffered stress and embarrassment from the negative information listed on their reports and being denied credit was enough to create a fact issue for the jury to determine emotional distress damages, if any. The Court opined that objective evidence is not a requirement for emotional distress damages.
• Punitive Damages. In this matter, the Court reasoned that a reasonable jury could find that the CRAs acted in reckless disregard of their duties by relying exclusively on automated procedures when the CRAs were on notice of the possible inaccuracy of the automated responses.

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