7th Cir. Upholds Rejection of Borrower’s FCRA and FDCPA Claims Arising from Collection and Reporting Post-Bankruptcy

The U.S. Court of Appeals for the Seventh Circuit recently upheld a trial court’s rejection of a borrower’s allegations that a mortgagee and its servicer violated the federal Fair Credit Reporting Act and the federal Fair Debt Collection Practices Act by allegedly inaccurately reporting her loan as delinquent following the borrower’s successful completion of her bankruptcy plan, allegedly rejecting her subsequent monthly payments, and filing a foreclosure action based on the supposed post-bankruptcy defaults.

A copy of the opinion in Freeman v. Ocwen Loan Servicing, LLC is available at:  Link to Opinion.

The plaintiff borrower obtained a loan to purchase her home. After falling behind on her mortgage payments, the mortgagee initiated a foreclosure action. The plaintiff borrower filed for bankruptcy and eventually cured her pre-petition mortgage default through her bankruptcy plan payments.

Unfortunately, after the successful completion of her bankruptcy plan, the servicer allegedly inaccurately reported her loan as delinquent and began rejecting her subsequent monthly payments, leading the mortgagee to file a second foreclosure action, which was later dismissed.

The plaintiff borrower sued the mortgagee and the servicer alleging violations of the FCRA and the FDCPA. The trial court dismissed the borrower’s FCRA claim as the borrower failed to identify the consumer reporting agency (CRA) that she supposedly notified of her credit dispute. The trial court also granted summary judgment against the borrower on her FDCPA claim, citing lack of standing. This appeal followed.

On appeal, the plaintiff borrower argued that the trial court “abused its discretion in denying her leave to amend to cure deficiencies in her FCRA claim,” and that the servicer violated the FCRA by failing to conduct a reasonable investigation after being notified by CRAs of her dispute over the delinquent loan reporting. She also argued that the servicer’s allegedly erroneous reporting and collection practices caused her various injuries sufficient to confer standing.

The Seventh Circuit affirmed the trial court’s dismissal of the FCRA claim, finding that the plaintiff borrower failed to specify which CRA she notified, thus not providing the servicer with fair notice of the claim.

The Seventh Circuit also upheld summary judgment in favor of the servicer on the borrower’s FDCPA claim, concluding that the borrower lacked standing. The Court determined that the borrower did not provide sufficient evidence of concrete injuries, such as monetary harm or intangible injuries closely related to common law analogues like defamation or invasion of privacy.

In so ruling, the Seventh Circuit noted its prior rulings that “[s]eeking legal advice in response to a communication concerning a disputed debt does not amount to an injury in fact,” and that “hiring a lawyer to resolve confusion about the proper course of action is also insufficient to confer standing.”  Moreover, the trial court excluded evidence of the borrower’s supposed attorney’s fees payments as a discovery sanction.

In addition, the Court held that the borrower’s self-serving declarations about the claimed reasons for her denial of credit supposedly due to the alleged inaccurate reporting did not amount “to specific facts establishing that [the servicer] disseminated the inaccurate reporting to a third party, such as [one of the CRAs], who understood the defamatory significance of the inaccurate reporting.”

Lastly, the Seventh Circuit rejected the borrower’s claims of emotional and reputational injury arising from the foreclosure action, reiterating its prior rulings “that anxiety, embarrassment, and stress are not concrete injuries in fact.”  Similarly, the Court held that the fact that the servicer “called her 12 times in a month and completed numerous door knocks” was insufficient, as “it is not enough for a plaintiff to be ‘annoyed’ or ‘intimidated’ by an FDCPA violation,” and mere “stress by itself with no physical manifestations and no qualified medical diagnosis does not amount to a concrete harm.”

Accordingly, the Seventh Circuit affirmed both the trial court’s dismissal of the plaintiff borrower’s FCRA allegations, and its entry of summary judgment in favor of the defendants on the plaintiff borrower’s FDCPA claim.