Hill v. Ocwen Loan Servicing, LLC

369 F.Supp.3d 1324

Benji HILL, Plaintiff,

v.OCWEN LOAN SERVICING, LLC, Equifax Information Services, LLC, and Transunion, LLC, Defendants.

CIVIL ACTION NO. 1:18-CV-02806-CAP

United States District Court, N.D. Georgia, Atlanta Division.

Signed March 19, 2019

ORDER

CHARLES A. PANNELL, JR., United States District Judge

This action was brought by the plaintiff under Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. (the "FCRA"). Before the court is the defendant Ocwen Loan Servicing, LLC's ("Ocwen") objections [Doc. No. 29] to the February 25, 2019, report and recommendation ("R & R") of the magistrate judge [Doc. No. 27], which recommends that Ocwen's motion to dismiss [Doc. No. 13] be granted in part and denied in part. Having reviewed the record, the court enters the following order.

I. Background and Factual Allegations¹

The plaintiff alleges that the defendants Ocwen, Equifax Information Services, LLC ("Equifax"), and TransUnion, LLC ("TransUnion") put incorrect information on his consumer credit report. Equifax and TransUnion are both credit reporting agencies ("CRAs") under the FCRA, while Ocwen is a "furnisher"—meaning Ocwen furnishes consumer information to CRAs like Equifax and TransUnion. Among other things, the plaintiff alleges that the defendants wrongly displayed a mortgage delinquency on his report based on his mortgage with Deutsche Bank National Trust Company ("Deutsche Bank").

In October 2006, Deutsche Bank sued the plaintiff to foreclose on the mortgage, alleging the plaintiff stopped making payments in May 2008. The plaintiff contends that the mortgage should have aged off his credit reports in June 2015, seven years after the date of the first delinquency on the loan. However, beginning in November 2017, Equifax and TransUnion inaccurately reported the mortgage account on the plaintiff's consumer credit reports.

The plaintiff sent letters to Equifax and TransUnion disputing the reports in November 2017 and January 2018. Both entities forwarded the relevant information to Ocwen. The plaintiff alleges that Ocwen then failed to conduct a reasonable investigation by, for instance, not checking its records showing the plaintiff's last payment date was in April 2008, and that Ocwen then falsely reported to Equifax and TransUnion that their report on the plaintiff's mortgage account was accurate. In other words, the plaintiff alleges that, after being notified of the disputes, Ocwen failed to conduct a reasonable investigation and failed to correct the inaccurate information. This caused the plaintiff's credit score to drop, and he was unable to obtain preapproval or otherwise prequalify for a mortgage loan with Caliber Home Loans ("Caliber") and with Fairway Independent Mortgage Corporation ("Fairway") in 2018.

The plaintiff then filed this action, and Ocwen has moved to dismiss the claims against it. The magistrate judge issued an R & R recommending that the court grant in part and deny in part Ocwen's motion to dismiss. The R & R recommends granting Ocwen's motion as to the plaintiff's "permissible purpose" claim under 15 U.S.C. § 1681b. The R & R also recommends denying Ocwen's motion to dismiss "to the extent it relies on the argument that the alleged credit denials were not based on consumer reports." R & R at 17 [Doc. No. 27]. No party has specifically objected to these findings.²

The R & R further recommends denying Ocwen's motion to dismiss as to the plaintiff's § 1681s-2(b) claim against Ocwen. Ocwen has filed objections to this latter finding, asserting that (1) only CRAs can be liable for reporting information about accounts that have been delinquent for more than seven years; (2) the seven-year aging off rule does not apply because of an exception; and (3) the date of the first delinquency did not trigger the seven-year aging period because the loan was not yet placed in collection or charged off.

II. Legal Standard

To challenge the findings and recommendations of the magistrate judge, a party must file with the clerk of court written objections which "shall specifically identify the portions of the proposed findings and recommendation to which objection is made and the specific basis of the objection." Heath v. Jones , 863 F.2d 815, 822 (11th Cir. 1989). If timely and proper objections are filed, the district court "shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1)(C).

The magistrate judge recommended that Ocwen's motion to dismiss be granted in part and denied in part [Doc. No. 27]. The court, therefore, will review de novo those findings and recommendations of the report and recommendation to which objection has been made. See Heath, supra ; see also Canty v. Fry's Elecs., Inc. , 736 F.Supp.2d 1352, 1381 n.2 (N.D. Ga. 2010). This court "may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed. R. Civ. P. 72(b)(3).

Since the underlying motion in this case is a motion to dismiss under Rule 12(b)(6), the court will also set forth the applicable legal analysis for resolving that motion. To survive a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). This requires more than mere "labels and conclusions, and a formulaic recitation of a cause of action's elements." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. The plaintiff must allege facts that "raise the right to relief above the speculative level." Id. When evaluating a Rule 12(b)(6) motion, the court must take the facts alleged in the complaint as true and construe them in the light most favorable to the plaintiff. Resnick , 693 F.3d at 1321–22.

III. Analysis

As noted above, the magistrate judge recommends denying Ocwen's motion to dismiss as to the plaintiff's claim against Ocwen under 15 U.S.C. § 1681s-2(b). In objecting to this finding, Ocwen asserts several arguments which the court will consider in turn.

First, Ocwen argues that only CRAs have a duty to remove accounts from consumer reports that have "aged-out" under 15 U.S.C. § 1681c(a). Ocwen argues that, as a furnisher, Ocwen does not fall under the obligations § 1681c(a) sets forth for CRAs, and that the plaintiff does not otherwise state a claim against it. Under § 1681c(a), CRAs are prohibited from reporting information about "[a]ccounts placed for collection" or "[a]ny other adverse item of information" that predate the consumer report by seven years or more. However, the magistrate judge concluded that § 1681c(a)'s obligation on CRAs does not prevent liability for Ocwen under § 1681s-2(b), which charges furnishers with investigating the accuracy of disputed information in consumer reports and correcting any discovered inaccuracies. See 15 U.S.C. § 1681s-2(b)(1).

The court agrees with the magistrate judge's analysis. The duty to investigate and correct disputed information also includes determining whether a mortgage delinquency should have aged off a consumer report. Indeed, other courts have found that furnishers can be liable based on similar allegations and have rejected Ocwen's argument. Cunningham v. Ocwen Fin. , No. 3:12-CV-0440, 2014 WL 688229, at *2 (M.D. Tenn. Feb. 20, 2014) ("[The plaintiff's] allegation that Ocwen ... knowingly reinserted inaccurate information regarding a loan account to show that it was delinquent falls within the plain language of Section 1681s–2(b)(1)(E)."). As to the plaintiff's allegations themselves, the plaintiff has specifically alleged that he "is making a claim against Ocwen under § 1681s-2(b)." Compl. at ¶ 12 n.1 [Doc. No. 1]. He has also sufficiently alleged the elements for that claim.

To state a claim against Ocwen under § 1681s-2(b), the plaintiff must allege that "(1) the furnisher received notice of the consumer's dispute from a consumer reporting agency and (2) the furnisher failed to conduct a reasonable investigation, failed to report the results of the investigation to the credit reporting agency, or failed to correct inaccurate or incomplete information." Campbell v. AmeriCredit , No. 1:09-CV-3115-RLV-LTW, 2010 WL 11647339, at *8 (N.D. Ga. Aug. 9, 2010) ; Labreck v. Bank of Am., N.A. , No. CV 17-015-RGA, 2018 WL 6427717, at *3 (D. Del. Dec. 7, 2018). The plaintiff has sufficiently done so. He has alleged that Ocwen received notice of the dispute letters sent to Equifax and TransUnion, and that Ocwen failed to conduct a reasonable investigation or otherwise failed to correct inaccurate information. The plaintiff alleges that Ocwen failed to review its own records regarding the date of the first delinquency on the mortgage and failed to correct that inaccurate information such that the CRAs did not remove the aged-off loan from the consumer report. Therefore, the plaintiff has plausibly stated a claim against Ocwen under § 1681s-2(b).

Next, Ocwen argues that it was nonetheless appropriate to include the account in the plaintiff's consumer reports because of an exception to the seven-year aging off rule. Under 15 U.S.C. § 1681c(b)(1), accounts that have been delinquent for more than seven years can be reported in connection with a credit transaction involving a principal amount of more than $ 150,000. Ocwen asserts that the mortgage loan was therefore appropriately included on a consumer report used for the plaintiff's 2018 loan applications. But the magistrate judge correctly concluded that...