IL Federal Court Denies Summary Judgment Because Mortgage Lender’s Failure to Report Disputes Could Constitute Misleading Omissions Under FCRA

The U.S. District Court for the Northern District of Illinois has denied a mortgage lender’s motion for summary judgment on a FCRA claim, holding that the lender’s practice of not identifying as disputed certain information furnished to credit reporting agencies (CRAs) could constitute a misleading omission in violation of FCRA.

By way of background, the plaintiff–mortgage loan borrower disputed the defendant–mortgage lender’s report to CRAs that she had missed a payment on her mortgage loan.  Following its investigation, the lender continued to report information that the borrower disputed to the CRAs without advising them that such information was disputed.

Consequently, the borrower sued the lender, alleging that it did not conduct a reasonable investigation of her dispute in violation of FCRA and that its practice of not identifying information furnished to the CRAs as disputed violated FCRA.  Following discovery, the lender moved for summary judgment.  Instead of disputing the facts, the lender contended that the FCRA provision requiring a furnisher to flag disputed information does not provide for a private right of action.

The Northern District of Illinois rejected this argument.  As the court recognized, the statutory subsection specifically requiring a furnisher to flag disputed information does not provide for a private right of action.  Nevertheless, the court observed that multiple appellate courts have held that a different statutory subsection — which separately requires furnishers to review for, and report to CRAs, inaccuracies and misleading omissions upon receipt of a dispute — does provide for a private right of action.  Thus, the court concluded that the borrower’s claims could proceed under this separate statutory subsection because the absence of a dispute flag could constitute a misleading omission.

Additionally, the court rejected the mortgage lender’s argument that it did not willfully violate FCRA because it was complying with widespread industry practice and trade association guidance.  Separately, the court denied the borrower’s motion for class certification because class treatment would be inappropriate given that each class member’s claim would turn on the merits of her individual dispute over credit report information.