Christina Felts v. Wells Fargo Bank, N.A. , 893 F.3d 1305 ( 2018 )

Case: 16-16314 Date Filed: 06/27/2018 Page: 1 of 25
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-16314
________________________
D.C. Docket No. 8:14-cv-02528-JDW-AEP
CHRISTINA FELTS,
Plaintiff-Appellant,
versus
WELLS FARGO BANK, N.A.,
a national association,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(June 27, 2018)
Before TJOFLAT and WILSON, Circuit Judges, and ROBRENO, * District Judge.
*
Honorable Eduardo C. Robreno, United States District Judge for the Eastern District of
Pennsylvania, sitting by designation.
Case: 16-16314 Date Filed: 06/27/2018 Page: 2 of 25
ROBRENO, District Judge:
Christina Felts appeals from an order granting summary judgment in favor
of her mortgage servicer, Wells Fargo Bank, N.A. (“Wells Fargo”), with respect to
Felts’ claim that Wells Fargo failed to conduct a reasonable investigation into the
accuracy of its credit reporting of her mortgage loan, in violation of the Fair Credit
Reporting Act (“the FCRA” or “the Act”), 15 U.S.C. § 1681 et seq. The district
court found that Felts’ FCRA claim against Wells Fargo failed as a matter of law
because the undisputed material facts demonstrated that Wells Fargo’s reporting of
Felts’ mortgage account as past due and delinquent during a forbearance plan was
neither inaccurate nor materially misleading, and thus Felts failed to make the
threshold showing that a reasonable investigation could have uncovered an
inaccuracy. We affirm.
I.
In July 2009, Felts refinanced the mortgage on her Carmel, Indiana home
through a new loan extended by the Federal National Mortgage Association,
commonly known as Fannie Mae (“the Loan”). In connection with the Loan, Felts
executed a Note and Mortgage that required her to make monthly mortgage
payments of $2,197.38. Wells Fargo acted as the servicer for the Loan. As
servicer, Wells Fargo was responsible for collecting Felts’ mortgage payments,
communicating with Felts regarding the payment of the Loan, and reporting certain
2
Case: 16-16314 Date Filed: 06/27/2018 Page: 3 of 25
information to the consumer credit reporting agencies (“the CRAs”) regarding
Felts’ compliance with her payment obligations under the Loan.
In January 2012, Felts lost her job. Several months later, she contacted
Wells Fargo to discuss a revised payment plan for the Loan. Following Felts’
telephone conversations with a Wells Fargo representative, Felts enrolled in an
unemployment forbearance program offered by Fannie Mae and administered by
Wells Fargo (“the Plan”). The terms of the Plan were set forth in an August 3,
2012, letter from Wells Fargo to Felts (“the Plan Letter”). The Plan Letter
explained that Felts was required to make “monthly forbearance plan payments” of
$25.00 per month beginning in September 2012 and ending in February 2013.
Doc. 119-3 at 1. The Plan Letter stated that “[e]ven though your monthly
statement will continue to show your regular mortgage payment amount, while
you’re under the Plan be sure you make the . . . forbearance plan payments by the
due dates noted in place of your regular monthly mortgage payments.” Id.
The Plan Letter further provided that, during the Plan’s forbearance period,
three conditions would apply: (1) if the loan was already in foreclosure, the
foreclosure proceedings would be placed on hold; (2) Wells Fargo would “report to
the credit bureaus that you are paying under a partial payment agreement for your
Wells Fargo Home Mortgage”; and (3) the regular mortgage payments would
3
Case: 16-16314 Date Filed: 06/27/2018 Page: 4 of 25
accrue during the course of the Plan. Id. at 2. With respect to the third condition,
the Plan Letter stated:
Even though your monthly forbearance plan payments
are lower than your regular mortgage payments, the
difference in the payment amounts accrues. We keep
track of the total amount that accrues during the Plan
period. The total accrued amount then becomes due and
is your responsibility to pay after you complete the Plan,
or when you become fully employed. When that
happens, you can apply for payment assistance through a
loan modification.
Id.
The Plan Letter further noted that “[e]ven though you are participating in
this Plan, you remain responsible for all other terms and conditions of your
existing mortgage.” Id. at 3.
Prior to Felts’ enrollment in the Plan, a Wells Fargo representative explained
the terms of the Plan to Felts in a recorded telephone conversation. With respect to
Felts’ payment obligations, the representative explained that after the Plan ended,
Wells Fargo would “take all that past due and they’ll just tack it on to the end of
the loan.” Doc. 91-1 at 2-3. Felts asked whether her payments would still be
considered late, clarifying “[b]ut you did say each month even though it’s refigured
as this it still shows up as a late payment?” Id. at 7. The Wells Fargo
representative responded “[y]es. Because it’s not the contractual payment.” Id.
Felts then confirmed that she understood.
4
Case: 16-16314 Date Filed: 06/27/2018 Page: 5 of 25
After enrolling in the Plan, Felts made timely monthly payments of $25.00
per month through January 2013 in accordance with the terms of the Plan. She
then secured new employment and applied for a loan modification with Wells
Fargo. During a three-month trial period for the loan modification, Wells Fargo
required Felts to make full payments on the Loan, which she did. Felts
subsequently sold her home and paid off the entire remaining balance on the Loan
by June 1, 2013.
In June 2013, Felts attempted to purchase a new home in Bradenton, Florida.
Her loan officer obtained her credit report and informed Felts that Wells Fargo had
reported the Loan to the CRAs as “past due” and “delinquent.” Specifically, Wells
Fargo reported the Loan as “30 Days Past Due” in August 2012, “60 Days Past
Due” in September 2012, “90 days past due” in October 2012, “120 Days Past
Due” in November 2012, “150 Days Past Due” in December 2012, and “180 or
more Days Past Due” in January 2013. Doc. 105, Ex. 36. As of June 2013, Felts’
credit report also listed a past due amount of $22,308 on the Loan. Doc. 114-3 at
6.
Over the next year and a half, Felts filed numerous disputes with all three
major CRAs – Experian Information Solutions, Inc. (“Experian”), Equifax, Inc.
(“Equifax”), and Trans Union LLC (“Trans Union”) – regarding the Loan. The
CRAs then reported the disputes to Wells Fargo. In response to the disputes, Wells
5
Case: 16-16314 Date Filed: 06/27/2018 Page: 6 of 25
Fargo reported the account status of the Loan as “paid in full,” and changed the
“amount past due” to $0.00. Felts’ updated credit report then reflected that there
was no longer a past due amount on the Loan. However, Wells Fargo did not
correct the delinquency information. Instead, on the dispute forms provided by the
CRAs, Wells Fargo reported that Felts’ account was past due from August 2012
through May 2013. A Wells Fargo loan specialist who processed one of the
dispute forms testified that the account was considered past due for each of those
months because Felts did not make her full contractual payment.
Felts was ultimately denied financing for the Bradenton home. In October
2014, Felts brought the underlying action against Wells Fargo, Experian, Equifax,
and Trans Union, alleging that they violated various provisions of the FCRA in
connection with their reporting of the credit status and history of the Loan.
With respect to Wells Fargo, Felts alleged that the company failed to
conduct a reasonable investigation in response to Felts’ credit reporting disputes
regarding the Loan, as required under § 1681s-2(b) of the FCRA. Felts asserted
that Wells Fargo’s failure to conduct a reasonable investigation resulted in her
denial of financing for the Bradenton home, which, in turn, required her to pay
storage costs and rent for an additional six months. Felts further alleged that,
because of her poor credit history, she was required to pay an initial deposit for an
escrow account, a mortgage insurance premium, and appraisal and inspection costs
6
Case: 16-16314 Date Filed: 06/27/2018 Page: 7 of 25
for her current home. Felts claimed that she suffered stress, anxiety, depression,
and related physical symptoms due to her overall experience with Wells Fargo.
Following discovery, Felts and Wells Fargo filed cross-motions for summary
judgment. 1
On August 31, 2016, the district court granted Wells Fargo’s motion for
summary judgment and denied Felts’ cross motion. The court concluded that there
was no genuine factual dispute as to the accuracy of the information Wells Fargo
reported to the CRAs because there was no evidence of any factual inaccuracy or
materially misleading impression. The district court then entered judgment for
Wells Fargo. Felts appealed.
II.
We review summary judgment rulings de novo, applying the same legal
standards used by the district court. Worley v. Fla. Sec’y of State, 717 F.3d 1238,
1240 (11th Cir. 2013). “Summary judgment is appropriate where there is no
genuine issue as to any material fact and the moving party is entitled to judgment
as a matter of law.” Jurich v. Compass Marine, Inc., 764 F.3d 1302, 1304 (11th
Cir. 2014). “An issue of fact is ‘material’ if, under the applicable substantive law,
it might affect the outcome of the case. An issue of fact is ‘genuine’ if the record
taken as a whole could lead a rational trier of fact to find for the nonmoving party.”
1
In the meantime, Felts settled with the CRAs. As part of Felts’ settlements with Experian
and Trans Union, they both agreed to report the Loan with no history of past-due payments.
7
Case: 16-16314 Date Filed: 06/27/2018 Page: 8 of 25
Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1259-60 (11th Cir. 2004)
(citations omitted). We “may affirm a decision of the district court on any ground
supported by the record.” Merle Wood & Assocs., Inc. v. Trinity Yachts, LLC, 714
F.3d 1234, 1236 n.1 (11th Cir. 2013) (quoting Krutzig v. Pulte Home Corp., 602
F.3d 1231, 1234 (11th Cir. 2010)).
III.
The FCRA is a consumer protection act that imposes certain duties on CRAs
and “furnishers of information” to CRAs. Furnishers of information, including
mortgage lenders, are required to (1) report accurate information to CRAs
regarding consumers, see 15 U.S.C. § 1681s-2(a); and (2) conduct an investigation
after receiving notice from a CRA of a dispute lodged by a consumer regarding
information provided by the furnisher, see id. § 1681s-2(b). Consumers have no
private right of action against furnishers for reporting inaccurate information to
CRAs regarding consumer accounts. See id. § 1681s-2(c)(1). Instead, the only
private right of action consumers have against furnishers is for a violation of
§ 1681s-2(b), which requires furnishers to conduct an investigation following
notice of a dispute. See id.
Section 1681s-2(b) is the basis for Felts’ claim here: she alleges that Wells
Fargo – a furnisher of information to the CRAs regarding Felts’ compliance with
her payment obligations under the Loan – failed to conduct a reasonable
8
Case: 16-16314 Date Filed: 06/27/2018 Page: 9 of 25
investigation in response to disputes she lodged with the three major CRAs
regarding the information Wells Fargo reported.
Upon receipt of a notice from a CRA that a consumer disputes the
completeness or accuracy of any information provided by a furnisher, the furnisher
must (1) conduct an investigation with respect to the disputed information;
(2) review all relevant information provided by the CRA; and (3) report the results
of the investigation to the CRA. See id. § 1681s-2(b)(1). If the furnisher finds,
following an investigation, that an item of information disputed by a consumer is
incomplete, inaccurate, or cannot be verified, the furnisher must either modify,
delete, or permanently block reporting of that information. See id. § 1681s-
2(b)(1)(E). Further, with respect to information the furnisher finds to be inaccurate
or incomplete, the furnisher also must report those results to all other CRAs. See
id. § 1681s-2(b)(1)(D).
Section 1681s-2(b) thus “contemplates three potential ending points to
reinvestigation: verification of accuracy, a determination of the inaccuracy or
incompleteness, or a determination that the information ‘cannot be verified.’”
Hinkle v. Midland Credit Mgmt., Inc., 827 F.3d 1295, 1301-02 (11th Cir. 2016)
(quoting 15 U.S.C. § 1681s-2(b)(1)(E)). A furnisher may verify that the
information is accurate by “uncovering documentary evidence that is sufficient to
9
Case: 16-16314 Date Filed: 06/27/2018 Page: 10 of 25
prove that the information is true,” or by “relying on personal knowledge sufficient
to establish the truth of the information.” Id. at 1303.
The “appropriate touchstone” for evaluating a furnisher’s investigation
under § 1681s-2(b) is “reasonableness.” Id. at 1301-02. “[W]hat constitutes a
‘reasonable investigation’ will vary depending on the circumstances of the case
and whether the investigation is being conducted by a CRA under § 1681i(a), or a
furnisher of information under § 1681s-2(b).” Id. at 1302. We have explained that
“[w]hether a furnisher’s investigation is reasonable will depend in part on the
status of the furnisher – as an original creditor, a collection agency collecting on
behalf of the original creditor, a debt buyer, or a down-the-line-buyer – and on the
quality of documentation available to the furnisher.” Id. When a furnisher ends its
investigation by reporting that the disputed information has been verified as
accurate, “the question of whether the furnisher behaved reasonably will turn on
whether the furnisher acquired sufficient evidence to support the conclusion that
the information was true.” Id.
Regardless of the nature of the investigation a furnisher conducted, a
plaintiff asserting a claim against a furnisher for failure to conduct a reasonable
investigation cannot prevail on the claim without demonstrating that had the
furnisher conducted a reasonable investigation, the result would have been
different; i.e., that the furnisher would have discovered that the information it
10
Case: 16-16314 Date Filed: 06/27/2018 Page: 11 of 25
reported was inaccurate or incomplete, triggering the furnisher’s obligation to
correct the information. Absent that showing, a plaintiff’s claim against a
furnisher necessarily fails, as the plaintiff would be unable to demonstrate any
injury from the allegedly deficient investigation. And, in turn, a plaintiff cannot
demonstrate that a reasonable investigation would have resulted in the furnisher
concluding that the information was inaccurate or incomplete without identifying
some facts the furnisher could have uncovered that establish that the reported
information was, in fact, inaccurate or incomplete.
As a result, Felts cannot prevail on her claim against Wells Fargo pursuant
to § 1681s-2(b) of the FCRA without identifying some fact in the record
establishing that the information Wells Fargo reported regarding her account was
inaccurate or incomplete. If the undisputed facts indicate that Felts has not met
this threshold requirement, Wells Fargo is entitled to judgment as a matter of law.
IV.
On appeal, Felts argues that the district court erred in finding that she failed
to make the requisite threshold showing that Wells Fargo reported inaccurate
information regarding the Loan. She also contends, as she did below, that she
could have met the threshold requirement by demonstrating that Wells Fargo’s
reporting was accurate but nonetheless materially misleading. Felts argues that the
district court erred in finding that she failed to make this alternative showing.
11
Case: 16-16314 Date Filed: 06/27/2018 Page: 12 of 25
A.
The district court held that Felts failed to demonstrate that Wells Fargo’s
reporting was inaccurate because the undisputed material facts demonstrated that
Felts’ reduced payments, although timely under the Plan, were not the payments
she was contractually bound to make under the Note.
As stated above, the Note for the Loan required Felts to make monthly
mortgage payments of $2,197.38 per month. Felts concedes that she did not make
payments of $2,197.38 per month beginning in July 2012. Indeed, it is undisputed
that Felts did not make any payment in July 2012 and August 2012, and paid only
$25.00 per month from September 2012 through January 2013. Felts nonetheless
contends that the following facts Wells Fargo reported regarding the Loan were
inaccurate: (1) that the “Scheduled Monthly Payment Amount” for the Loan was
$2,197.38 per month every month, including during the Plan’s effective period;
and (2) that Felts’ payments on the account for the Loan were “past due” and
“delinquent” from July 2012 to January 2013.
Felts argues that this information was inaccurate because, based on the text
of the Plan Letter and Wells Fargo’s correspondence and representations regarding
the Plan, “it is undisputed that during the Forbearance Plan period, Felts was not
required to pay $2,197.38 beginning in July 2012.” Appellant’s Br. at 25. Felts
also contends that the Consumer Data Industry Association’s guidelines regarding
12
Case: 16-16314 Date Filed: 06/27/2018 Page: 13 of 25
credit reporting (“the CDIA Guidelines”) required Wells Fargo to report Felts’
account differently during the Plan period. Finally, Felts relies on four district
court cases from outside this circuit permitting an FCRA claim against a furnisher
to move forward on the basis of allegedly inaccurate reporting in connection with a
loan modification agreement or forbearance plan, arguing that similar inaccuracies
existed here.
We find none of these arguments persuasive: neither the facts Felts identifies
in the record nor the CDIA Guidelines demonstrate that Wells Fargo reported
inaccurate information, and the cases Felts cites are inapposite. We address Felts’
arguments seriatim.
i.
Felts argues that, under the explicit terms of the Plan, she was not required
to pay the full amount due on the Note during the Plan period. Felts points to the
portion of the Plan Letter stating that “[t]he total accrued amount then becomes due
and is your responsibility to pay after you complete the Plan, or when you become
fully employed.” Id. (quoting Doc. 119-3 at 2). Felts argues that this language
means that the difference between the temporary, lower Plan payment and the full,
original loan payment was not due until after she completed the Plan, and therefore
that she was not required to make payments of $2,197.38 during the time period
the Plan was in effect. Felts also notes that the definition of delinquency is “not
13
Case: 16-16314 Date Filed: 06/27/2018 Page: 14 of 25
paying a debt as agreed,” Appellant’s Reply Br. at 5-6 (citing Black’s Law
Dictionary), and argues that because she paid the amounts Wells Fargo agreed she
was required to pay in the Plan Letter, she was not delinquent on her debt. As a
result, according to Felts, Wells Fargo should have reported the “Scheduled
Monthly Payment Amount” as the lower amounts due under the Plan: zero dollars
for July 2012 and August 2012, and $25.00 per month from September 2012
through January 2013. Felts also contends that Wells Fargo should not have
reported Felts’ payments as “past due” and “delinquent,” because she was paying
the amount Wells Fargo required her to pay under the Plan.
Felts’ argument misconstrues Wells Fargo’s reporting obligation. Wells
Fargo was not required to furnish information to the CRAs regarding every
agreement it formed with Felts. Instead, Wells Fargo was required to furnish
information to the CRAs regarding Felts’ payment status and history for one
agreement in particular: the Note Felts signed for the Loan. The CRAs requested,
and Wells Fargo submitted, information regarding Felts’ compliance with her
obligation to make installment payments in accordance with the Note she signed.
Felts’ apparent compliance with the terms of a second, separate agreement she
entered into with Wells Fargo – the Plan – has no bearing on the accuracy of the
information Wells Fargo reported to the CRAs regarding Felts’ compliance with
the terms of her first, original agreement – the Note – unless the Plan legally
14
Case: 16-16314 Date Filed: 06/27/2018 Page: 15 of 25
modified the terms of the Note. As Felts has not identified any fact in the record
establishing that the Plan legally modified the Note, the information Wells Fargo
reported regarding Felts’ compliance with the terms of the Note was not
inaccurate: Wells Fargo reported that (1) the Scheduled Monthly Payment Amount
for the Note was $2,197.38, which Felts agrees that it was; and (2) Felts did not
pay the amount the Note required her to pay beginning in July 2012, which Felts
concedes she did not do.
ii.
Felts contends that, because the FCRA requires “maximum possible
accuracy,” Appellant’s Br. at 26 (quoting 15 U.S.C. § 1681e(b)), “it is
unreasonable from a factual standpoint for a furnisher to ignore its own
correspondence and representations to a consumer in evaluating both what it
reports and the contents of disputes as they relate to the accuracy of such
reporting,” id.
None of the “correspondence and representations” Felts identifies
establishes that the Plan legally modified the Note. As Felts concedes, the Plan
Letter explicitly stated that Felts’ payments under the Plan did not satisfy the
amounts “owed” under the Note. This language does not suggest that the Plan
modified the Note, and instead confirms the opposite: that Felts’ partial payments
under the Plan did not satisfy the monthly payments the Note required her to make.
15
Case: 16-16314 Date Filed: 06/27/2018 Page: 16 of 25
Felts’ conversations with the Wells Fargo employee also indicate that the Plan did
not modify the Note: the Wells Fargo employee confirmed to Felts that her
payments would “still show[] up as a late payment” because “it’s not the
contractual payment.” Finally, the deposition testimony Felts cites merely
describes how Wells Fargo decided what information to report and how the
electronic systems Wells Fargo used for reporting functioned, and therefore has no
bearing on the accuracy of the information Wells Fargo reported regarding Felts’
account.
iii.
Felts argues that the CDIA Guidelines demonstrate that the information
Wells Fargo reported regarding Felts’ account was inaccurate. Felts explains that
the Fannie Mae Servicing Guide instructed servicers of Fannie Mae-originated
loans, including Wells Fargo, to follow the CDIA Guidelines when reporting
information regarding borrowers’ accounts to CRAs. Felts contends that, because
the CDIA Guidelines required the “Scheduled Monthly Payment Amount” to be
reported as the “new” payment amount for loans in forbearance, Wells Fargo
should have reported that field as zero dollars for July 2012 and August 2012, and
$25.00 for September 2012 through January 2013. In addition, the CDIA
Guidelines instructed Wells Fargo to include the “Special Comment Code” of
“CP,” to indicate that the Loan was in forbearance, which Wells Fargo did not do.
16
Case: 16-16314 Date Filed: 06/27/2018 Page: 17 of 25
Felts contends that compliance with these guidelines “would undoubtedly have
painted a vastly different picture of Felts’ creditworthiness.” Appellant’s Br. at 33.
Felts acknowledges that the CDIA Guidelines did not instruct Wells Fargo to
report her account as non-delinquent. However, Felts attempts to tie the Scheduled
Monthly Payment Amount field to the reporting of her account as past due and
delinquent by arguing that, had Wells Fargo reported the Scheduled Monthly
Payment Amount as the lower amounts due under the Plan, Felts “never could
have been reported” as late on her account for the Loan, and “never could have had
any alleged past-due balance” for the Loan.
We find that the CDIA Guidelines do not establish that Wells Fargo reported
inaccurate information. The CDIA Guidelines did not preclude Wells Fargo from
reporting Felts’ account as “past due” and “delinquent” for the months that Felts
did not make full payments under the Note. Felts’ argument that reporting the
Scheduled Monthly Payment Amount field differently would have required Wells
Fargo to report Felts’ loan as current again misconstrues Wells Fargo’s reporting
obligation. During the Plan period, Felts was past due and delinquent on her
payment obligations under the Note. Even if Wells Fargo had reported the specific
amounts of Felts’ scheduled partial payments, as opposed to alternatively reporting
that Felts was “paying under a partial payment agreement,” it would not have been
inaccurate for Wells Fargo to report that Felts was not satisfying her payment
17
Case: 16-16314 Date Filed: 06/27/2018 Page: 18 of 25
obligations under the Note. With respect to the Scheduled Monthly Payment
Amount field itself, although Wells Fargo admits that it did not report that field as
indicated in the CDIA Guidelines, there are no facts in the record demonstrating
that reporting the amount as the lower amount due under the Plan would have
changed Felts’ overall credit picture. Indeed, had Wells Fargo reported the
Scheduled Monthly Payment Amount as $25.00 while simultaneously reporting
Felts’ account as “past due” and “delinquent” – which was accurate – prospective
lenders may have interpreted the report to mean that Felts did not pay the lower,
$25.00 per month payment.
iv.
None of the cases Felts cites compels a different result. Two of the cases
Felts cites, Bradshaw v. BAC Home Loans Servicing, LP, 816 F. Supp. 2d 1066 (D.
Or. 2011) and Darrin v. Bank of America, N.A., No. 12-0228, 2013 WL 877087
(E.D. Cal. Mar. 7, 2013), involved loan modification agreements, not forbearance
plans. 2 Under a forbearance plan, such as the one at issue here, a lender agrees to
2
In Bradshaw, the District of Oregon denied a furnisher’s motion for summary judgment
where the furnisher had reported the plaintiffs’ account as delinquent after sending the plaintiffs
a letter stating that their loan modification agreement had been approved and instructing them to
pay the modified amounts rather than the original amounts. See 816 F. Supp. 2d at 1069-70,
1072. The court determined that, viewing the facts in a light most favorable to the plaintiffs,
they had entered into “a binding modification agreement” that lowered the payments due under
their original mortgage. Id. at 1072. Given those facts, the court found that a factual dispute
existed regarding the accuracy of the defendants’ reporting of the account as delinquent during
the loan modification period. See id. In Darrin, the Eastern District of California denied a
motion to dismiss brought by the defendant furnisher where the furnisher reported the plaintiff’s
18
Case: 16-16314 Date Filed: 06/27/2018 Page: 19 of 25
temporarily refrain from exercising its rights under a loan agreement in exchange
for payments from the borrower.3 In this case, Wells Fargo agreed to forbear from
its right to foreclose on Felts’ home in exchange for Felts’ payment of $25.00 per
month. A loan modification agreement, by contrast, permanently legally alters a
borrower’s obligations under the original loan agreement. Loan modification
agreements reduce a borrower’s monthly payments over the remainder of the loan
term by, for example, reducing the interest rate or extending the length of the loan
term. 4
Felts asserts that Bradshaw and Darrin are both applicable because the Plan
was a precursor to a potential later loan modification, and therefore, as in those two
cases, it was inaccurate for Wells Fargo to report her payments as past due and
delinquent when she was making the payments Wells Fargo instructed her to make.
mortgage account as delinquent while the plaintiff’s loan modification application was pending,
and the plaintiff alleged she made the payments the furnisher required her to make at that time.
See 2013 WL 877087 at *4-5.
3
As the U.S. Department of Housing and Urban Development explains, a forbearance is
one of several loan workout options available to borrowers who are unable to make their
payments. See HUD: Explore Loan Workout Solutions to Avoid Foreclosure,
https://www.hud.gov/program_offices/housing/sfh/econ/loanworkoutsolutions (last visited June
26, 2018) [hereafter HUD Workout Solutions]. Under a forbearance, a lender “may allow [a
borrower] to reduce or suspend payments for a short period of time.” Id.
4
Unlike a forbearance plan, a “mortgage modification” agreement allows the lender “to
change one or more terms of [the] original loan to make the payments more affordable.” HUD
Workout Solutions. Under a modification, a borrower’s loan is “permanently changed” by
(1) adding the missed payments to the existing loan balance; (2) changing the interest rate,
including making an adjustable rate into a fixed rate; or (3) extending the number of years the
borrower has to repay. Id.
19
Case: 16-16314 Date Filed: 06/27/2018 Page: 20 of 25
Felts is correct that the Plan Letter mentions that, at the close of the Plan period,
Felts could apply for a loan modification. However, unlike in Bradshaw, in which
the parties had already entered into a loan modification agreement, and Darrin,
where the plaintiff’s loan modification application was pending, Felts had not yet
filed a loan modification application at the time that Wells Fargo reported her
account as past due and delinquent. In addition, the payments Felts made were not
the slightly reduced payments a borrower might have after legally modifying a
loan agreement, but instead nominal payments that could not have resulted in the
full payment of the Note within her lifetime. 5
The sole case Felts cites in which a court considered a claim against a
furnisher based upon information reported in connection with a forbearance plan as
opposed to a loan modification agreement did not address whether or not the
furnisher’s reporting was accurate. In Davenport v. Sallie Mae, Inc., 124 F. Supp.
3d 574 (D. Md. 2015), aff’d, 623 F. App’x 94 (4th Cir. 2015), the court determined
that there were genuine issues of material fact with respect to whether or not the
5
Relying on Bradshaw, Felts also argues that it was “misleading at best” for Wells Fargo
to report her payments on the Note as delinquent while simultaneously instructing her to make
smaller payments. Appellant’s Br. at 29. The Bradshaw court explained that it was misleading
for the furnisher to report the plaintiffs’ mortgage loan as delinquent because, construing the
facts in the light most favorable to the plaintiffs, they had legally modified the terms of their loan
agreement and paid the amounts due under the modified agreement. See Bradshaw, 816 F. Supp.
2d at 1072. That is not the case here, as the Plan did not modify the terms of the Note. To the
extent that Felts argues that it was misleading to her for Wells Fargo to report her account as past
due and delinquent while she was making the payments Wells Fargo asked her to make, that
cannot form the basis for an action against a furnisher, as the FCRA only provides a private right
of action against furnishers for the failure to conduct a reasonable investigation.
20
Case: 16-16314 Date Filed: 06/27/2018 Page: 21 of 25
furnisher had conducted a reasonable investigation after reporting a loan as
delinquent during a forbearance plan. See id. at 581. The court based its
determination on correspondence between the furnisher and the plaintiff, which the
court found created a factual dispute regarding the reasonableness of the
investigation. See id. Felts contends that because inaccuracy is a threshold
question, the court must have considered and rejected the furnisher’s argument that
the information it reported was accurate. However, nothing in the court’s opinion
suggests that the court evaluated the accuracy of the reported information as a
threshold question; instead, the court mentioned the accuracy argument in passing
when summarizing the arguments the furnisher made, and then proceeded to
analyze the disputed facts regarding the reasonableness of the investigation.
Further, even if the court had determined that, under the specific facts of that case,
it was inaccurate for the furnisher to report the loan as delinquent during the
forbearance plan, that has no bearing on whether the Plan at issue in this case
legally modified Felts’ Note.
The final case Felts cites, Thorpe v. EduCap, Inc., No. 13-3830, 2013 WL
5956191 (N.D. Cal. Nov. 6, 2013), is even less applicable: the court did not
address whether the furnisher’s reporting was accurate in the context of the FCRA.
Instead, the court dismissed the plaintiff’s FCRA claim against the furnisher for
failure to state a claim because the plaintiff had not adequately alleged that the
21
Case: 16-16314 Date Filed: 06/27/2018 Page: 22 of 25
furnisher’s investigation was not reasonable. See id. at *6-7. The court separately
evaluated whether the plaintiff had adequately pleaded that the furnisher’s
reporting of her student loan following a settlement agreement was misleading
under California’s Consumer Credit Reporting Act, not the FCRA. See id. at *3-5.
* * *
Under the circumstances of this case, regardless of whether Felts may have
been confused about how her account would be reported to the CRAs, and whether
the Wells Fargo could have better explained to Felts how the account would be
reported, Felts did not meet her payment obligations under the Note. Therefore,
the information Wells Fargo reported was not inaccurate as a matter of law.
B.
Felts argues in the alternative that, even if Wells Fargo’s credit reporting
regarding the Loan was technically accurate, it was nonetheless materially
misleading. In support of this assertion, Felts cites cases from other circuits in
which courts have allowed a consumer’s claim to proceed against a furnisher on
the basis of misleading statements or omissions, including three cases Felts claims
are analogous to this action.
Felts cites Freedom v. Citifinancial LLC, in which the court denied a motion
to dismiss an FCRA claim against the defendant furnisher, holding that the plaintiff
had adequately alleged that the furnisher’s reporting was inaccurate where it
22
Case: 16-16314 Date Filed: 06/27/2018 Page: 23 of 25
reported the plaintiff’s loan as discharged in bankruptcy, but then also reported a
“scheduled payment” of $143.00 for the loan. See No. 15-10135, 2016 WL
4060510, at *6 (N.D. Ill. July 25, 2016). The court found that even though the
report did indicate the debt was discharged, reporting a balance on the account
“could create the mistaken impression that [the] [p]laintiff still owed on the
account, which was not accurate.” Id. Felts also cites Twomey v. Ocwen Loan
Servicing, LLC, No. 16-0918, 2016 WL 4429895 (N.D. Ill. Aug. 22, 2016), in
which the court similarly found that reporting a loan as having a balance and past
due amount is misleading where the loan was discharged in bankruptcy, even if the
report otherwise clearly indicates that the loan was discharged, because “a reader
of the report could be misled into thinking that [the] [p]laintiff still personally
owed this obligation (or, at a minimum, be confused as to this point).” Id. at 4.
Felts asserts that because she made every payment Wells Fargo required
under the Plan, reporting her account as delinquent created a “wildly inaccurate”
picture of her creditworthiness. Felts argues that she was conscientious,
proactively contacting her loan servicer to discuss payment options following the
termination of her employment, and that it was therefore misleading for her credit
report to portray her as irresponsible by stating that her payments were “past due”
and “delinquent,” even if those statements were technically true. Felts claims that,
23
Case: 16-16314 Date Filed: 06/27/2018 Page: 24 of 25
in terms of her credit report, she was hardly in a different position from someone
who failed to make any loan payments whatsoever.
Felts’ argument again ignores that her partial payments under the Plan
simply were not the payments owed under the Note. Unlike in the cases Felts
cites, where the borrowers no longer legally owed the amounts listed, Felts did owe
payments under the Note, which she failed to make. 6 Therefore, it was not
misleading for Wells Fargo to report that she was not making payments under the
Note as agreed, particularly in light of Wells Fargo’s additional statement that she
was paying under a partial payment agreement.
Although Felts now likens her position to that of a person who made no
payments at all, she ignores that the Plan provided her with a valuable benefit: she
was permitted to stay in her home. Without the Plan, Wells Fargo could have
foreclosed on Felts’ mortgage following her inability to make full payments under
the Note. Under the Plan, Wells Fargo gave up its foreclosure rights in exchange
for token payments from Felts representing less than 2% of the amount owed each
month. Indeed, if the Court adopted Felts’ rule of law – that Wells Fargo was
required to report Felts’ payments as timely because it instructed her to make lower
payments – Felts’ credit report may have been misleading to prospective lenders,
6
Felts also cites Dougherty v. Quicksius, LLC, No. 15-6432, 2016 WL 3757056 (E.D. Pa.
July 14, 2016), in which the court held that a criminal background report created a misleading
impression where it duplicated entries regarding the plaintiff’s prior criminal offenses. Id. at *2.
As it involved a criminal background report, and not liability under the FCRA, Dougherty is not
applicable here.
24
Case: 16-16314 Date Filed: 06/27/2018 Page: 25 of 25
the report’s intended recipients. Felts’ inability to meet her payment obligations
under the Note is relevant information for a prospective lender: upon viewing
Felts’ credit report, a lender could surmise that, during a period of unexpected
financial difficulty, Felts either did not have or did not choose to use other funds to
pay the full amount due under the Note. Had Wells Fargo reported that Felts had
made payments under the Note as agreed when she was in fact paying only $25.00
per month, the report would have conveyed that Felts fully met her payment
obligations under the Note, which was not true.
Finally, Felts argues that Wells Fargo omitted information that created a
materially misleading impression of Felts’ compliance with the Note. Specifically,
Felts focuses on Wells Fargo’s omission of the lower payment amounts she agreed
to pay under the Plan in the Scheduled Monthly Payment Amount field. As
discussed above, those “omissions” did not render Felts’ credit report misleading,
particularly in light of Wells Fargo’s additional affirmative statement that Felts
was paying under a partial payment agreement.
V.
For the foregoing reasons, the judgment of the district court granting Wells
Fargo’s motion for summary judgment is
AFFIRMED.
25