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Hansen v. JP Morgan Chase Bank, N.A.

United States District Court, D. Utah, Central Division

March 31, 2017

RICK D. HANSEN and CONNIE B. HANSEN, individual citizens of Utah, Plaintiffs,
v.
JPMORGAN CHASE BANK, NA, CHASE BANK, JPMORGAN, JPMORGAN CHASE & CO., CENLAR, FSB, EQUIFAX, INC., EXPERIAN INFORMATION SOLUTIONS, INC., INNOVIS DATA SOLUTIONS, INC., TRANSUNION, LLC, and JOHN DOES 1 - 25, Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING CENLAR, FSB'S MOTION FOR JUDGMENT ON THE PLEADINGS

          David Nuffer District Judge

         This case involves claims for damages arising from alleged incomplete or inaccurate reporting of a government taking of real property owned by Plaintiffs Rick D. Hansen and Connie B. Hansen (the “Hansens”) which had negative effects on the Hansens' credit rating.[1]The Hansens assert six claims against Defendant CENLAR, FSB (“CENLAR”): (1) violations of the Fair Credit Reporting Act (“FCRA”);[2] (2) violations of the FCRA;[3] (3) violation of the Fair and Accurate Transactions Act of 2003 (“FACTA”);[4] (4) violations of the Consumer Credit Reporting Reform Act of 1996 (“CCRRA”);[5] (5) failure to reasonably investigate after multiple contacts;[6] and (6) defamation of credit.[7] CENLAR seeks judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure arguing that the Hansens' claims fail as a matter of law, are time barred, or are preempted.[8]

         Because the Hansens' claims against CENLAR[9] fail as a matter of law and are time barred, CENLAR's Motion[10] is GRANTED.

         Contents

         BACKGROUND ............................................................................................................................ 2

         DISCUSSION ................................................................................................................................. 5

         No private right of action exists for alleged violations of Section 1681s-2(a) ......................... 7

         The Hansens' allegations are insufficient to state a claim against CENLAR for violation of Section 1681s-2(b) ........................ 8

         The Hansens' claim for defamation of credit against CENLAR fails as a matter of law ....... 11

         Alternatively, the Hansens' claims against CENLAR are time barred by the FCRA's statute of limitations............................................ 13

         ORDER ......................................................................................................................................... 15

         BACKGROUND

         The Hansens were owners of certain real property in Spanish Fork, Utah (the “Property”) where they had lived and Mr. Hansen conducted a cement curbing business for more than two decades.[11] On December 20, 2013, the Hansens transferred ownership of the Property to the cities of Spanish Fork and Springville as a result of an eminent domain taking for the expansion of the Spanish Fork/Springville Municipal Airport.[12] The Hansens were paid the Property's fair market value for the taking.[13] However, the payment was insufficient to cover the existing debt owed on the Property.[14]

         Prior to the taking, by letters dated July 22, 2013, the Hansens notified the Property's lien holders, Chase Bank and CENLAR, of the government's intent to exercise eminent domain on the Property.[15] This spurred a series of communications over a period of several months between the Hansens and Chase Bank and CENLAR regarding the debts owed on the Property.[16] Despite being repeatedly informed that the transaction was a government taking, Chase Bank and CENLAR treated the Hansens' notice as a request for a short sale.[17] A “short sale” is a sale for less than value, which is treated in the industry as a foreclosure.[18]

         The taking resulted in Chase Bank and CENLAR settling the debts for an amount that was less than full payment.[19] When the Hansens later attempted to obtain a replacement property, they discovered that their credit rating had dropped as a result of information Chase Bank and CENLAR furnished to the major credit reporting agencies concerning the debts.[20]Chase Bank and CENLAR had furnished information that the Hansens were delinquent in their payments on the debts from October 2013 through December 2013, and that the Property was sold for less than value.[21]

         Beginning on January 8, 2014, the Hansens sent letters to Chase Bank and CENLAR demanding that the information furnished to the major credit reporting agencies be corrected to reflect a government taking.[22] In response, CENLAR issued letters on January 16, 2014, January 22, 2014, and February 11, 2014, recanting use of the term “short sale, ” and acknowledging that the transaction was a government taking and that the debt was “paid in full.”[23] CENLAR's letters were publicly noticed and shared with the major credit reporting agencies.[24] However, CENLAR later informed the Hansens, by letters dated May 20, 2014, and May 29, 2014, that it had furnished information to the major credit reporting agencies that the debt was “settled for less than the full amount … due to eminent domain of the [Property].”[25]

         Chase Bank initially responded to the Hansens' demands by indicating that it “sent an electronic notification to the major credit agencies (Equifax, Experian, Innovis and TransUnion) requesting that they suppress the delinquent payments reporting on [the Hansens'] account for October 2013, November 2013, and December 2013.”[26] Chase Bank also notified the Hansens that it asked the “four major credit agencies (Equifax, Experian, Innovis and TransUnion) to show that [the Hansens had] paid off (or settled) the account for less than the full balance as of December 27, 2013.”[27] However, Chase Bank later informed that Hansens that it “requested that the credit reporting agencies report the loan as paid in full for less than the full balance - settled. The credit bureaus do not report the narrative ‘Short Sale.'”[28] Chase Bank continues to characterize the debt as settled for “less than the full balance, ” without reference to a government taking or the exercise of eminent domain.[29]

         Despite the drop in their credit rating, the Hansens purchased a replacement property.[30]However, they received a higher interest rate which increased their monthly mortgage payments by approximately $400.[31] The authorized limits on the Hansens' personal and business credit cards also suffered reductions which impacted the Mr. Hansen's ability to conduct his cement curbing business and secure future contracts.[32]

         DISCUSSION

         CENLAR seeks judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure.[33] A motion for judgment on the pleadings is evaluated by the same standard as a Rule 12(b)(6) motion to dismiss for failure to state a claim.[34] Under this standard, a defendant is entitled to judgment on the pleadings when the complaint, standing alone, is legally insufficient to state a claim for which relief may be granted.[35] When considering the motion, the thrust of all well-pleaded facts in the complaint is presumed, but conclusory allegations need not be considered.[36] Nor are the complaint's legal conclusions and opinions accepted, whether or not they are couched as facts.[37]

         The United States Supreme Court has held that satisfying the basic pleading requirements of the federal rules “demands more than an unadorned, the defendant-unlawfully-harmed-me accusation.”[38] “A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.”[39] “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[40] Moreover, “naked assertions devoid of further factual enhancement” are insufficient to state a claim that will survive a motion for judgment on the pleadings.[41]

         “The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.”[42] “This requirement of plausibility serves not only to weed out claims that do not (in the absence of additional allegations) have a reasonable prospect of success, but also to inform the defendants of the actual grounds of the claim against them.”[43]

         The Hansens' Complaint asserts six claims against CENLAR.[44] The predicate for CENLAR's liability on the six claims is alleged violations of 15 U.S.C. §§ 1681s-2(a) and 1681s-2(b). The Hansens generally allege that CENLAR willfully or negligently furnished incomplete or inaccurate information to the major credit reporting agencies concerning the Hansens' debt on the Property.[45] The Hansens also allege that CENLAR willfully or negligently failed to investigate and correct the information it furnished after being repeatedly notified by the Hansens of their dispute.[46] The Hansens seek damages for CENLAR's alleged willful or negligent noncompliance under 15 U.S.C. §§ 1681n and 1681o.[47]

         The Hansens' claims against CENLAR[48] fail as a matter of law and are time barred.

         No private right of action exists for alleged violations of Section 1681s-2(a)

         In asserting their claims against CENLAR, the Hansens make repeated reference to and allegations concerning the obligations the FCRA imposes on furnishers of information to credit reporting agencies under 15 U.S.C. § 1681s-2(a).[49] Section 1681s-2(a) pertains to the duty of furnishers to provide accurate information to credit reporting agencies.[50] Among the obligations imposed by Section 1681s-2(a) are:

• a furnisher may not furnish information to a credit reporting agency that it knows or has reasonable cause to believe is inaccurate;[51]
• a furnisher must promptly correct and update the information it furnishes to credit reporting agencies;[52]
• a furnisher may not furnish information to a credit reporting agency without notice that the information is disputed by the consumer;[53]
• a furnisher must provide timely written notice to the consumer when it furnishes negative information to a credit reporting agency;[54] and
• a furnisher must comply with certain investigative procedures concerning the accuracy of the information it furnishes when a consumer raises a dispute directly with the furnisher.[55]

         The Tenth Circuit has held that “while [the] FCRA allows federal agencies and state officials to enforce the[] obligations [of Section 1681s-2(a)], it does not allow consumers … a private right of action to do so.”[56] Therefore, even assuming the Hansens' allegations demonstrate that the obligations of Section 1681s-2(a) apply to CENLAR, and that CENLAR failed to comply with them, any claim that CENLAR violated Section 1681s-2(a) fails as a matter of law.

         Therefore, insofar as the Hansens' claims against CENLAR[57] are predicated on violations of Section 1681s-2(a), the claims fail as a matter of law.

         The Hansens' allegations are insufficient to state a claim against CENLAR for violation of Section 1681s-2(b)

         In asserting their claims against CENLAR, the Hansens also make repeated reference to and allegations concerning the duties the FCRA imposes on furnishers of information to credit reporting agencies under 15 U.S.C. § 1681s-2(b).[58] Section 1681s-2(b) pertains the duties of furnishers to comply with certain investigative procedures after receiving notice from a credit reporting agency that a consumer disputes the completeness or accuracy of furnished information.[59] Among the duties imposed by Section 1681s-2(b) are:

• a furnisher must timely conduct an investigation with respect to the disputed information;[60]
• a furnisher must review all relevant information provided by a consumer reporting agency;[61]
• a furnisher must report the results of its investigation to the consumer reporting agency that provided the furnisher notice of the consumer's dispute;[62]
• if the investigation reveals that the furnished information was incomplete or inaccurate, a furnisher must report the results to all credit reporting agencies to which the information was furnished;[63] and
• if the information disputed by the consumer is incomplete, inaccurate, or cannot be verified, a furnisher must promptly modify, delete, or permanently block the reporting of the information.[64]

         “The investigation an information furnisher undertakes must be a reasonable one.”[65]

         Unlike Section 1681s-2(a), a private right of action exists against furnishers of information to credit reporting agencies for violations of Section 1681s-2(b).[66] However, the Tenth Circuit has held that “[t]he furnisher's duty to investigate [under Section 1681-2(b)] arises only after a [credit reporting agency] notifies the furnisher of a dispute and, conversely, does not arise when notice is provided directly from a consumer.”[67] “Thus, a consumer cannot recover under [Section] 1681s-2(b) if they do not initiate the process for recovery by notifying a [credit reporting agency] of the dispute.”[68]

         The Hansens fail to allege that they ever initiated the investigative procedures of Section 1681s-2(b) by providing notice to a credit reporting agency of their dispute regarding the completeness or accuracy of the information CENLAR furnished.[69] Rather, the Hansens allege only that they raised their dispute directly with Chase Bank and CENLAR, and through the office of Senator Orrin Hatch.[70]

         The closest the Hansens come to alleging that they initiated the investigative procedures of Section 1681s-2(b) is found in following allegation:

Either the [credit reporting agency] was not provided, with a [consumer dispute verification form], containing sufficient detail to explain that this was a “taking” and not a foreclosure type action, in which case the furnisher of information is to blame for causing the negative credit report, or the furnisher did provide direct information clearly classifying the transaction as a government taking based on eminent domain and the [credit reporting agency] mischaracterized the transaction as carrying a negative impact. The results were the same as neither the [credit reporting agency] nor the furnisher satisfy the reasonable obligation test.[71]

         However, this allegation is generalized, conclusory, and argumentative. The allegation is found in the Hansens' claim against Chase Bank and CENLAR for failure to reasonably investigate after multiple contacts.[72] But the allegation does not refer to CENLAR as the relevant furnisher of information.[73] Nor does the allegation identify the relevant credit reporting agency.[74] The allegation also acknowledges that the credit reporting agency may not have been provided with a consumer dispute verification form.[75]

         Moreover, the Hansens do not allege, even on information and belief, that CENLAR ever received relevant information from a credit reporting agency concerning the Hansens' dispute.[76]“A ‘reasonable' investigation [by a furnisher] is one that a reasonably prudent person would undertake under the circumstances.”[77] And “[h]ow thorough an investigation must be to be ‘reasonable' turns on what relevant information was provided to a furnisher by the [credit reporting agency] giving notice of a dispute.”[78]

         In the absence of allegations that the Hansens initiated the investigative procedures of Section 1681s-2(b), and that CENLAR received relevant information concerning the Hansens' dispute from a credit reporting agency to guide its investigation, any claim that CENLAR violated Section 1681s-2(b) fails as a matter of law. Therefore, each of the Hansens' claims against CENLAR[79] fail as a matter of law.

         The Hansens' claim for defamation of credit against CENLAR fails as a matter of law

         CENLAR seeks dismissal of the Hansens' claim for defamation of credit on the ground that the claim is preempted by the FCRA.[80] This argument is based on the mistaken assumption that the claim is predicated on state common law, and not the provisions of the FRCA.[81] CENLAR's mistaken assumption is understandable because the claim is titled “Defamation of Credit”[82] without reference to the FCRA and its allegations do not expressly refer to the FCRA section ...


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