Florida court holds it is not misleading to report accelerated debt as delinquent under FCRA

The U.S. District Court for the Southern District of Florida held that a loan servicer that reported to credit reporting agencies that a mortgage loan was 120 days or more delinquent and in foreclosure, but did not specify that the loan was accelerated did not violate the Fair Credit Reporting Act (“FCRA”) even though acceleration means the mortgagor has no obligation or ability to make monthly mortgage payments. The Court also held the servicer had no duty to investigate or correct the information contained in its reports despite receiving two dispute notices from the borrower because the reported information was accurate and complete.

After the mortgagor in Leones v. Rushmore Loan Management Services, LLC, 0:17-cv-61216 (S.D. Cal Dec. 11, 2017) stopped making payments and defaulted on her mortgage loan, the servicer’s predecessor accelerated the loan and filed a foreclosure. Thereafter, the defendant servicer began servicing the loan. It reported to credit reporting agencies that the mortgagor’s mortgage loan was 120 days or more delinquent and that foreclosure proceedings had been initiated. In response to these reports, the mortgagor sent disputes to two credit reporting agencies which notified the servicer of the consumer disputes. The servicer nevertheless continued to report the loan as delinquent and in foreclosure.

The mortgagor sued asserting that the servicer willfully and negligently violated FCRA. She claimed the servicer’s reports were false or misleading. She did not have the ability or obligation to make monthly payments because the foreclosure action had accelerated the mortgage. She was therefore not delinquent in her payments. Despite being aware of her disputes, the servicer’s failure to investigate and correct this reported information constituted a violation under FCRA.

The Court found for the servicer and dismissed the complaint. It held that reporting the loan delinquent and that a foreclosure was pending was both accurate and complete. The court found no merit to the mortgagor’s contention that the reported information was rendered incomplete or misleading by failing to also state that the mortgage loan was accelerated. The court reasoned that even if the mortgagor’s dispute asserted a legal defense to the validity of the debt, the servicer’s report contained no factual inaccuracies. And because the reported information was neither inaccurate nor incomplete, the servicer had no further duty to investigate the mortgagor’s claims and had not violated FCRA by continuing to report accurate and complete.

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