Louisiana District Court Allows FCRA Claim for Failure to Correct Inaccurate Information to Proceed against Loan Servicer

Last week, a federal judge in the Middle District of Louisiana granted in part and denied in part a mortgage loan servicer’s motion to dismiss two homeowners’ claims for violations of RESPA, FCRA, and breach of contract, stemming from the servicer’s alleged failure to honor a forbearance and deferral agreement, and failure to correct information erroneously reported to the credit reporting agencies regarding the co-owner but non-borrower plaintiff.  The Court dismissed the RESPA and breach of contract claims, but allowed the non-borrowing plaintiff to proceed under FCRA.

Specifically, plaintiffs alleged that the servicer erroneously listed the Note holder’s husband as a co-borrower.  The servicer nonetheless reported this incorrect information to credit reporting agencies, in violation of FCRA.  Further, plaintiffs alleged that the servicer’s failure to respond to the borrower plaintiff’s qualified written requests (QWRs) regarding the alleged pre-existing repayment deferral plan agreed to by the prior servicer in violation of RESPA violation and in breach of an agreement with a prior servicer of the loan.

In its motion to dismiss, the servicer argued that its response to plaintiff’s QWR was sufficient because the servicer provided detailed information in its response.  Further, the servicer argued that the borrowing plaintiff did not properly allege the existence of a contract in support of her claim for breach of the payment deferral agreement.  Lastly, the servicer argued plaintiffs did not allege that the servicer failed to “conduct an investigation” after receiving notice of the non-borrowing plaintiff’s dispute as required under 12 U.S.C. § 1681s-2(b).

The Court agreed with the servicer with respect to the borrower plaintiff’s RESPA and breach of contract claims, and dismissed them for the reasons offered by the servicer.  However, the Court allowed the non-borrower plaintiff’s FCRA claim to proceed.  The Court found that the non-borrower plaintiff had properly stated a claim under FCRA by alleging that the servicer did not correct its inaccurate reporting and continued to report that the non-borrower co-owner was obligated on the Note, after the non-borrower plaintiff sent a notice of dispute and notice to the servicer.  

The case is Watson et al., v. Rushmore Loan Management Services, LLC et al., 3:22-cv-00518 (M.D. La. 2022)