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Financial Services Law Insights and Observations

District Court grants defendant’s motion in FCRA, FDCPA case

Courts FCRA FDCPA New York Debt Collection Consumer Finance

Courts

On November 10, the U.S. District Court for the Western District of New York granted a defendant debt agency’s motion for judgment resolving FCRA and FDCPA allegations. A father allegedly co-signed an apartment lease for his daughter (collectively, “plaintiffs”), which included a provision that allowed the plaintiffs to terminate the lease if another individual took over the lease. The plaintiffs allegedly did not move in but identified two replacement tenants to take over the lease. The owner of the apartment allegedly signed separate leases with the identified replacement tenants and “thwarted [plaintiffs’] efforts to have someone take over [the] [l]ease.” The owner placed the debt with the defendant for collection, who reported the debt to three credit reporting agencies. The plaintiffs disputed the debt, but the defendant confirmed the accuracy of the information. The plaintiffs sued, alleging the defendant violated the FCRA for not conducting a proper investigation of the dispute, and the FDCPA for attempting to collect the allegedly invalid debt, which allegedly negatively impacted the plaintiffs’ credit scores, their ability to obtain a car loan, and efforts to apply for an apartment.

With respect to the FCRA claim, the district court found that the plaintiffs’ allegation regarding an inaccurate debt “turns on an unresolved legal question, a section 1681s-2(b) claim that a furnisher failed to conduct a reasonable investigation of disputed credit information cannot stand.” Additionally, since the claim was “tethered to a legal dispute,” the district court found that it cannot form the basis of an FCRA claim. With respect to the FDCPA allegations, the district court dismissed the claim finding that the plaintiffs did not adequately state a claim because the plaintiffs’ claim was based on “nothing more than their conclusory and self-serving allegations that they do not owe the [d]ebt.”

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