Case Developments April 12, 2018 – May 1, 2018
In this edition of our Credit Card Litigation update, we summarize a decision out of the Seventh Circuit where the court granted a credit card issuer’s motion to compel arbitration and a decision out of the Sixth Circuit where the Court granted a judgment creditor’s motion to dismiss plaintiff’s claims for violation of the Fair Debt Collection Practices Act.
- Plaintiff alleged, on behalf of herself and others similarly situated, that Defendants’ collection letter threatened legal action that could not be taken, in violation of several sections of the FDCPA.
- Defendants filed a motion to stay Plaintiff’s individual claims, dismiss the class claims, and compel arbitration.
- The District Court granted Defendants’ Motion, finding that the arbitration agreement was enforceable and that the provisions within the arbitration agreement survived assignment from Plaintiff’s original creditor to the Defendants.
- The Court also found that Plaintiff’s FDCPA claims fell within the scope of the arbitration agreement, because “disputes relating to collection matters” were specifically enumerated within the arbitration agreement.
- Plaintiff alleged that a judgment creditor violated the FDCPA by including $20.00 for “probable court costs” in its “Affidavit for Order of Wage Garnishment.”
- Plaintiff claimed that her judgment creditor did not request those costs in its Complaint and, therefore, had no right to collect the $20.00 amount, which included a $10.00 payment to the Clerk of Court and a $10.00 payment to Plaintiff’s employer.
- The Court granted Defendant’s motion to dismiss, holding that Plaintiff’s attempt to attack the broad language of the Kentucky court’s judgment was barred by the Rooker-Feldman doctrine and that the Kentucky judgment’s award of “Costs for the Filing of Any Executions” included the post-judgment costs that Defendant incurred.
Case Developments February 9 – April 3, 2018
In this edition of our Credit Card Litigation update, we summarize a decision out of the Second Circuit and a decision out of the Tenth Circuit.
Anderson v. Credit One Bank, N.A., (In re Anderson), 884 F.3d 382 (2d Cir. 2018)
- Chapter 7 debtor filed putative class action to recover for Credit One’s alleged violation of discharge injunction by continuing to report, as “charged off,” credit card debt that was discharged in bankruptcy.
- Credit One moved to compel arbitration based on an arbitration clause in the credit card member agreement.
- The Bankruptcy Court for the Southern District of New York denied Credit One’s motion and the District Court affirmed.
- The Second Circuit held that debtor’s claim could not be arbitrated because the dispute concerned a core bankruptcy proceeding.
- The Second Circuit reasoned that the discharge injunction at issue here is integral to the bankruptcy court’s ability to provide debtors with a fresh start.
Cavlovic v. J.C. Penney Corp., Inc., 884 F.3d 1051 (10th Cir. 2018)
- Customer alleged that defendant’s advertisements were fraudulent and deceptive, and defendant, J.C. Penney Corp., Inc., moved to compel arbitration.
- The District of Kansas denied, and the Tenth Circuit affirmed, denial of the motion to compel arbitration because although Customer’s credit card had a J.C. Penney logo, J.C. Penney was not a party to the credit card agreement that included the arbitration provision.
- The Court also denied J.C. Penney’s attempt to arbitrate under the 2014 Rewards Program the Court held that Customer’s claims did not fall under the arbitration clause connected to that Program.
Case Developments February 10, 2018 – March 7, 2018
In this edition of our Credit Card Litigation update, we summarize decisions out of the District of Kansas involving the granting of summary judgment in a FCRA case, the District of Nevada involving the denial of class certification in a putative TCPA class action, and a case out of the Eastern District of California involving potential preemption of state law claims related to unauthorized credit pulls.
- Plaintiff alleged that Credit One violated the Fair Credit Reporting Act by reporting her as an authorized user on her ex-husband’s account after she disputed the account.
- Plaintiff, however, had not consented to being an authorized user and disputed the account with the credit reporting agency, noting that it was fraudulent or in error. She further alleged that she directly disputed the notation with Credit One within the 30-day response period under FCRA, and Credit One still failed to correct the report.
- The Court granted Credit One’s motion for summary judgment, first finding that a furnisher’s duty ends once it submits a report back to a CRA regarding a received dispute.
- The Court also found that Credit One had sufficient procedures in place for FCRA investigations, where it used 350 of its own and vendor employees to review disputes and the time spent reviewing those disputes correlated with the intricacies of the disputes.
- Finally, the Court found that Credit One’s investigation was reasonable because Plaintiff did not provide sufficient detail in the dispute to direct Credit One to the authorized user issue.
- Plaintiff alleged that Credit One violated the Telephone Consumer Protection Act when it called Plaintiff’s mobile phone via an automated dialer without prior consent. However, Plaintiff admitted he used his cell phone to access his mother’s Credit One account without her permission and that is how Credit One obtained his number.
- The Court denied Plaintiff’s motion for class certification under Fed. R. Civ. P. 23(a) and 23(b)(3), finding that Plaintiff’s claims were not typical of the potential class because his conduct, including his admitted unauthorized contact, raised a significant danger that the litigation would focus on issues and defenses unique to Plaintiff.
- The Court also held that an individual inquiry concerning consent was required as to each account in order to identify class members, and agreed with Credit One that the difficulties in identifying class members under these circumstances made the class unmanageable.
- Separately, the Court granted Credit One’s motion to dismiss Plaintiff’s Nevada Deceptive Trade Practices Act claim, finding the alleged TCPA violation—related to calls made to collect a debt—did not constitute doing business for purposes of the NDTPA.
- Plaintiff filed this action alleging that Comcast failed to take reasonable steps to verify consumer identities when setting up accounts for cable television and other services, in violation of the California Credit Reporting Agencies Act and the California Business and Professions Code.
- Plaintiff alleged that Comcast pulled his credit report prior to a fraudulent account being set up in his name and should have noted inconsistencies in the report and made further inquiries before setting up the account.
- Comcast moved to dismiss and argued that Plaintiff’s California state law claims were preempted by the Fair Credit Reporting Act.
- The Court denied Comcast’s motion to dismiss, holding that Plaintiff’s state law claims were not preempted by the FCRA because the allegations against Comcast did not relate to the duties of furnishers, but rather, established additional duties under state law for entities that use consumer credit reports.
- The Court noted that its ruling was consistent with the majority of courts to consider the issue.
Case Developments January 9- February 8, 2018
In this edition of our Credit Card Litigation update, we summarize decisions out of the Eastern District of California and the District of Nevada, the first involving denial of class certification and the second involving a motion for summary judgment on FCRA claims.
- Although this case involves auto finance litigation, we selected it given the application of class certification defenses that can be generally applied in response to FDCPA and state consumer protection statute claims.
- Plaintiff April Lindblom brought suit against Santander Consumer USA under the FDCPA and a parallel state consumer protection statute, challenging the legality of Western Union Speedpay fees retained by Santander.
- Lindblom proposed a single statewide California putative class based on individuals who paid Speedpay convenience fees in connection with any consumer loan held and/or serviced by Santander.
- Santander made two arguments in response pursuant to Federal Rule of Civil Procedure 23: 1) that Lindblom is not a member of the defined class and consequently cannot represent the class in this action; and 2) even if Lindblom met the class membership requirement, she is an improper representative because she is subject to a unique defense that deprives her of typicality.
- The court denied Lindblom’s class certification motion, opining that due to the applicability of the statute of limitations, Lindblom is neither an adequate class representative nor is her claim typical of the putative class.
- Plaintiff Michael Hannon alleged FCRA violations based on alleged inaccurate reporting, and failure by credit reporting agencies to reinvestigate that reporting, after his discharge in bankruptcy.
- Defendant Experian moved for summary judgment, making several arguments, including: 1) that Hannon could not prove the information reported was inaccurate; and 2) that its reinvestigation was reasonable because it received verification from the creditor.
- The court granted Experian’s motion, explaining that Hannon could not make a prima facie showing of inaccurate reporting because evidence was inadmissible via the hearsay rule. The court found that Hannon’s attempt to link certain bank accounts listed in his bankruptcy filing via news articles was insufficient.
- The court also determined that a reasonable investigation conducted by Experian could not have discovered the alleged inaccuracies.
Case Developments December 7, 2017 – January 8, 2018
In this edition of our Credit Card Litigation update, we summarize decisions out of the Eastern District of Pennsylvania and the Northern District of Alabama, the first involving FDCPA claims predicated on a prior dismissed debt collection action and the second involving a motion to dismiss FCRA claims.
Chenault v. Credit Corp Solutions, Inc., No. 16-5864, 2017 WL 5971727 (E.D. Pa. Dec. 1, 2017)
- Plaintiff brought an action under the FDCPA alleging that Defendant harassed Plaintiff and attempted to collect a debt by unconscionable means predicated on a state court debt collection action Defendant filed against him. The state court action was dismissed as Defendant had failed to produce substantiating documentation when it filed its complaint. Plaintiff contended that filing suit without sufficient proof of the debt violates the FDCPA.
- The court granted Defendant’s motion for summary judgment on the FDCPA claims.
- First, the court held that employing the court system is not an abusive or harassing means of collecting a debt.
- Second, the court held that Defendant provided sufficient proof of the debt through two account statements along with a Bill of Sale and a sworn affidavit, the authenticity of which was not disputed. The court concluded that Defendant’s failure to provide a signed credit card agreement or evidence of the items purchased on the account in the action did not constitute a violation of the FDCPA.
- The court further noted that a debt collector has no duty to independently investigate a debt prior to initiating collection activities and may rely on information provided to the debt collector from the entity from whom the debt was purchased.
Williams v. Capital One Bank (USA), N.A. & Equifax Info. Servs., No. 5:17-CV-01216-CLS, 2018 WL 317712 (N.D. Ala. Jan. 8, 2018)
- Plaintiff filed an action against Capital One alleging FCRA violations predicated on a Capital One state court default judgment against him from 2011.
- Capital One moved to dismiss, arguing the claims were barred by the Rooker-Feldman doctrine and that Capital One was not a “furnisher of information” within the meaning of the FCRA.
- As to the Rooker-Feldman issue, the Court observed that although Plaintiff stated his belief that the state court judgment against him was meritless, the current action against Capital One was not challenging the validity of the debt itself, but rather the reporting of the debt by Capital One. As a result, the Court concluded that the FCRA claim was not inextricably intertwined with the state court judgment and the Rooker-Feldman doctrine did not bar the claim.
- However, the court next determined that Capital One was not a “furnisher of information” within the meaning of the FCRA because it was not the party that had provided Equifax with the information about Capital One’s default judgment against Plaintiff. Consequently, the court held Capital One could not be held responsible for failure to follow any of the investigatory and reporting procedures set forth in the FCRA.
- Accordingly, the court granted Capital One’s motion to dismiss.