Alley v. Farmers Bank, Inc.

GRANVILLE ALLEY AND KAREN JOHNSON N/K/A KAREN ALLEY Plaintiffs, v. THE FARMERS BANK, INC., Defendant.

CASE NO. 3:13-CV-146 (CAR)

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA ATHENS DIVISION

August 29, 2014

ORDER ON DEFENDANT'S MOTION TO DISMISS

Plaintiffs filed this action asserting claims against Defendant The Farmers Bank ("the Bank") for violations of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681s-2(b), and various state law claims including breach of contract, breach of the Georgia covenant of good faith and fair dealing, violation of the Georgia Residential Mortgage Fraud Act, negligent and intentional infliction of emotional distress, and injury to credit. Plaintiffs seek damages for injuries they allegedly suffered as a result of the Bank's alleged failure to investigate or reasonably investigate and correct discrepancies in their credit report. Currently before the Court is the Bank's Motion to Dismiss the Complaint.

Having considered the Complaint, the applicable law, and the Motion and responses thereto, the Court hereby GRANTS in part and DENIES in part the Bank'sMotion to Dismiss [Doc. 5]. The Motion is GRANTED as to Plaintiffs' state law claims alleged in Counts III through X of their Complaint, and consequently, those claims are hereby DISMISSED. The Motion is DENIED as to Plaintiffs' claim for violation of the FCRA alleged in Count I of the Complaint. The Court reserves ruling on Plaintiffs' claim for breach of contract alleged in Count II of their Complaint, and the parties are hereby DIRECTED to file briefs addressing whether this claim is preempted by the FCRA within fourteen (14) days of the date of this Order.

BACKGROUND

For purposes of the Motion, the Court accepts all factual allegations in Plaintiffs' Complaint as true and construes them in the light most favorable to Plaintiffs.

On or about December 7, 2007, Plaintiffs executed and delivered a promissory note in the original principal amount of $694,024.91 ("Note 1") to purchase their home in Greensboro, Georgia, and to refinance a residential lake lot on Lake Oconee. Plaintiffs executed a deed to secure debt and security agreement granting the Bank a security interest in both their home and the lake lot. Approximately one and a half years later, in February and May 2009, Plaintiffs fell behind on payments due under Note 1.

In 2009, the Bank and Plaintiffs entered into a modification and renewal of Note 1 secured under the same security deed ("Note 2"). Approximately two years later, in May, June, and July 2011, Plaintiffs again failed to make timely payments. Thus, onAugust 1, 2011, the Bank and Plaintiffs entered into another renewal of the mortgage loan on their home ("Note 3"). As part of the agreement, Plaintiffs agreed to a friendly foreclosure sale of the lake lot for the amount of $290,000.00 to be applied to the outstanding mortgage debt.

For three and a half years, during the dates Notes 1 and 2 were in effect from December 2007 through July 2011, the Bank reported Plaintiffs' mortgage history to Equifax, a credit reporting agency, including the amount of the Notes, the date the Notes were opened, the balance due on the Notes, and any late payments made on the Notes. At some point, however, Plaintiffs discovered that The Bank stopped reporting their mortgage history after they executed Note 3 in August 2011. Thus, Plaintiffs' credit reports do not reflect their perfect payment records from August 2011 onward.

In September 2012, Plaintiffs contacted Equifax and complained about their inaccurate credit history regarding Note 3. Thereafter, Equifax sent an inquiry to the Bank regarding Plaintiffs' complaint. The Bank responded to the inquiry stating that it was reporting accurately and that it was reporting all required information under the FCRA. In September or October 2012, Plaintiffs met with one of the Bank's loan officers at least three times and demanded that the Bank recommence reporting their mortgage to the credit reporting agencies. The loan officer advised that the Bank would not do so. Plaintiffs presented the loan officer with information showing the Bank could, in fact,report the mortgage history to the credit reporting agencies, but the Bank refused to report the mortgage.

In late 2012 or early 2013, Plaintiffs approached Wells Fargo in an attempt to refinance their home. A Wells Fargo loan officer told Plaintiffs their credit score needed to be 640 or higher in order to refinance and informed Plaintiffs their score fell short due to the lack of mortgage payment history since 2011.

In April and May 2013, as Note 3 neared maturity, the Bank informed Plaintiffs that it did not intend to renew the mortgage unless Plaintiffs made a principal down payment of $35,000.00. Plaintiffs continued to plead for the Bank to accurately report their mortgage history, but it refused. Plaintiffs were unable to pay the $35,000.00; therefore, they were unable to meet the credit score threshold to refinance at another bank and save their home. Note 3 matured, and the Bank foreclosed on Plaintiffs' home.

Plaintiffs brought this action asserting one count for violation of the FCRA, 15 U.S.C. § 1618s-2(b), and nine counts for various violations of Georgia laws. The Bank then filed the instant Motion seeking to dismiss Plaintiffs' Complaint in its entirety.

STANDARD OF REVIEW

On a motion to dismiss, the Court must accept as true all well-pleaded facts in a plaintiff's complaint.¹ To avoid dismissal pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, "a complaint must contain specific factual matter, accepted as true,to 'state a claim to relief that is plausible on its face.'"² A claim is plausible where the plaintiff alleges factual content that "allows the court to draw the reasonable inference that the Bank is liable for the misconduct alleged."³ The plausibility standard requires that a plaintiff allege sufficient facts "to raise a reasonable expectation that discovery will reveal evidence" that supports a plaintiff's claims.⁴ "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff s obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."⁵ Factual allegations must be enough to raise a right to relief above the speculative level.⁶

DISCUSSION

I. FCRA Claim

Plaintiffs allege the Bank, as a furnisher of credit information, violated the FCRA by (1) ceasing to report Plaintiffs' mortgage to the credit reporting agencies⁷ in 2011, and (2) either failing to conduct an investigation as to the disputed information or wrongfully concluding that the information was accurate and complete. The Bank moves to dismiss the FCRA claim, arguing it had no duty to report the dispute underthe FCRA. Alternatively, the Bank argues Plaintiffs' FCRA claim fails to state a claim upon which relief may be granted. The Court is unpersuaded by the Bank's arguments and finds Plaintiffs' FCRA claim may proceed.

Congress passed the FCRA to protect "consumers from having inaccurate information about their credit status circulated in order to protect their reputation."⁸ Under the FCRA, when a debtor disputes the completeness or accuracy of a credit report with a credit reporting agency ("CRA"), the CRA must promptly notify the furnisher of information of the dispute.⁹ Upon receiving notice of a dispute, the furnisher of information has an affirmative duty to conduct an investigation with respect to the disputed information.¹⁰ If the investigation finds that any information is incomplete or inaccurate, the furnisher must report those results to all CRAs possessing that incomplete or inaccurate information.¹¹

Thus, to support a FCRA claim against a furnisher of information, a private plaintiff must allege that the furnisher, after receiving proper written notice of a dispute regarding the completeness or accuracy of information provided by a person to a consumer reporting agency, did one of the following: (1) failed to conduct an investigation with respect to the disputed information; (2) failed to review all relevant information provided by the consumer reporting agency pursuant to § 1681i(a)(2) of theFCRA; (3) failed to report the results of the investigation to the CRA; or (4) if an item of information disputed by a consumer is found to be inaccurate, incomplete, or cannot be verified after any reinvestigation, failed to modify, delete, or permanently block the reporting of that item of information.¹²

Plaintiffs have alleged sufficient factual allegations to meet the threshold Twombly/Iqbal pleading requirements to support a claim under § 1681s-2(b). According to the Complaint, the Bank began reporting Plaintiffs' mortgage history to the CRAs with Note 1 when Plaintiffs first bought their home in 2007. The Bank continued to report Plaintiffs' mortgage history with Note 2 and then ceased reporting the mortgage history on the same home in 2011, when Plaintiffs renewed the mortgage with Note 3. Plaintiffs notified Equifax of the disputed omission of their mortgage from their credit report. Equifax, in turn, notified the Bank of the dispute, thereby triggering the Bank's duty to investigate the disputed information. Plaintiffs met with the Bank's representative at least three times and presented information to the Bank regarding its misleading omission, but the Bank failed to investigate or unreasonably investigated its omission and refused to report the mortgage to the CRAs. The Bank's failure to report the mortgage damaged Plaintiffs' credit score, which ultimately resulted in the loss of their home.

The rules of pleading "do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face."¹³ Judicial inquiry at this stage focuses on whether the challenged pleadings "giv...