Court ruling re. LVNV, Sherman, Resurgent motion for summary judgment
Here’s the 10/20/06 ruling:
The motion was granted in part and denied in part.
The court dismissed claims for violations of sections of the FCRA that do NOT apply to creditors, but only to CRAs and it also dismissed the defamation claims. Several other claims were NOT dismissed and TX state collection laws are not preempted.
One of the more interesting excerpts:
“Namely, continuing to report the account as “open” when it had in fact been charged off. To argue the issue of the reasonableness of the investigation, both parties offer expert opinions reaching opposite conclusions concerning the proper standard for reporting charged off accounts. Whether a defendant’s investigation is reasonable is a factual question normally reserved for trial. Crabill v. Trans Union, L.L.C., 259 F.3d 662, 664 (7th Cir. 2001). A fact issue remains as to the reasonableness of the investigation and as to the correct method of reporting charged off accounts. Therefore, summary judgment on Maloney’s claims under §1681s-2(b) is DENIED.
The real problem is of course that the CRAs ALLOW collections to be reported as open tradelines and unfortunately, the CRAs are NOT defendants in this action.
It’s really the fault of the CRAs that they set up the accounts INCORRECTLY.
I really wonder if collectors are given a CHOICE, can they request to report collections as collections and NOT as tradelines?
WHY are CRAs reporting some collections as collections accounts (which barely impact on FICO scores once they’ve been assigned for a few years) and some collections, just as LVNV / Sherman, are reported as open delinquent tradelines, DESTROYING the credit scores?
See the BIZARRE LVNV reporting
E. Fair Debt Collection Practices Act violation claims against LVNV and Sherman
Failure to give proper notice, reporting false information, and failure to give required disclosures– §§1692g, 1692e(8) and §1692e(11)
LVNV and Sherman argue that they are not liable for any violations under the FDCPA because, (1) they are creditors, not debt collectors ...
That is TOTALLY absurd! Did they grant credit? As a CREDITOR, by definition, you have to give someone credit. Right?
Right, the judge agreed:
However, even though they collect debts for themselves, they are still debt collectors within the meaning of §1692a(4) and §1692a(6) of the Act, because the debts were already in default when they were assigned to the companies. 15 U.S.C.A. §1692a(6); See Perry v. Stewart Title Co., 756 F.2d. 1197, 1208 (5th Cir. 1985); Kimber v. Federal Financial Corp., 668 F.Supp. 1480, 1486 (M.D. Ala. 1987). LVNV and FDCPA [that should probably read “Sherman"] clearly fall into the assignee exception to the definition of the creditor. See 15 U.S.C. §1692a(4). Therefore, they are debt collectors and are subject to the requirements of the FDCPA.
... However, Defendants correctly argue that debt collectors and creditors are not vicariously liable under the FDCPA for the acts of a third-party independent debt collector. Defendants rely on Scally v. Hilco Receivables, LLC, asserting that they are not liable for the acts of Resurgent. 392 F. Supp. 2d 1036 (N.D. Ill. 2005). That case held, that in light of very specific facts showing the independent relationship between the debt purchaser and the debt collector, the debt purchaser could not be held vicariously liable for the independent contractor’s acts. Id. at 1041. However, the Court declines at this time to decide if Resurgent was in fact an independent debt collector because Plaintiff’s claims for failure to give proper notice and disclosure fail for other reasons. LVNV and Sherman argue that since they did not communicate directly with Maloney, they are not required to give proper notice pursuant to §1692g or §1692e(11). Requirements under both of these sections are triggered after a debt collector’s initial communication with a debtor. See 15 U.S.C. §1692g and §1692e(11). Maloney admits that neither LVNV nor Sherman ever directly communicated with her (See Appx. pp. 22, 27). Therefore, Plaintiff’s claims under 1692(g) and 1692e(11) against LVNV and Sherman are dismissed, and summary judgment is GRANTED on these claims.
However, even in the absence of direct communication with Maloney, Defendants can be held liable under the FDCPA for reporting inaccurate credit information which was known or should have been known to be false. See U.S.C. §1692e(8). As stated previously, summary judgment is “seldom appropriate” on whether a party possessed a particular state of mind. See Magill, 736 F.2d at 979. Therefore, summary judgment is DENIED on the claims against LVNV and Sherman under §1692e(8).
Obviously, you want to read the entire ruling if you’re interested in collection suits.
What I’m missing is whether they reported the RECENT lates I so often see with the LVNV reporting. I haven’t seen the actual reporting resulting in this suit.
Maloney’s defamation claims fail because she has produced no evidence of malice. Maloney argues that Defendants’ continued reporting of the accounts as open and late, despite Maloney’s dispute notifications, necessarily constitutes malice. To support this claim, Maloney produces an expert opinion of Evan Hendricks purporting that reporting charged off accounts as open and late is inaccurate and in violation of industry standards. (See Appendix p. 74). However, the Hendricks opinion is not a factor in determining if Defendants acted with malice. Even if the reporting was inaccurate, Maloney has presented no evidence that the Defendant either (1) knowingly reported inaccurate information or (2) reported information with reckless disregard of its accuracy. To the contrary, Resurgent investigated Maloney’s claims, determined the accounts were accurate, and reported the accounts as “disputed” by the customer. Maloney has not produced any evidence of malice; therefore, the defamation claims are dismissed. Summary judgment on these claims is GRANTED..
I can’t tell whether lates were DISPUTED and VERIFIED in response to disputes. And of course it sure would be nice to have affidavits from OTHER consumers who disputed lates, which would help with establishing reckless disregard of accuracy. I STILL saw these RECENT LATES for the LVNV collections on credit reports dated a couple weeks or so ago.
Resurgent claims it correctly reported the debt because, pursuant to industry standards and the Credit Reporting Resource Guide, all accounts reported on behalf of debt purchasers are listed as “open.”
This makes no sense, I’d like to get a copy of this “Credit Reporting Resource Guide”.
I think the account should have been disputed as “disputed”, so that they would have had to VALIDATE the account. When you only dispute specific like the “open” account, you don’t seem to get that right to VALIDATION.
Or did I miss that in the ruling?
I previously posted the “validation” received from LVNV - search the blog.
Posted by Christine on 10/23/2006 at 07:33 PM
Credit - Collection - Economic News • (2) Comments • Permalink
Cristine,
Regarding your remark, “This makes no sense, I’d like to get a copy of this “Credit Reporting Resource Guide”. I thought this might help you.
It is not my attention to offend you in any way, knowing you are years ahead of me in correcting the accuracy of credit reports and establishing the highest FICO scores possible. Just trying to be helpful.
Here is the link in getting your “Credit Reporting Resource Guide 2006 Edition”. Get it as soon as you can and save it on your hard drive, because they will move it or delete it when you least expect them to. (Metro 2)
http://www.cdiaonline.org/files/PDFs/2006CRRGWholeManual.pdf
Sincerely,
Dora L. Gutierrez
Dora, you have no idea how much I appreciate this link! I reposted it and uploaded the file in a new blog posting so that hopefully many consumer litigants will find it. It will never be deleted here.
THANK YOU VERY MUCH!!!!
Christine
