The loan broker and his brokerage argued in Whitley v. Taylor Bean & Whitacker Mortg. Corp., 08 C 3114 (N.D.Ill., Apr. 2009) that they have no liability under the federal Credit Repair Organizations Act (CROA) which prohibits false statements to consumer reporting agencies or persons providing credit. See, 15 U.S.C. § 1679b. Plaintiff alleges that defendants violated section 1679b of the CROA by fraudulently inflating and falsifying information on plaintiff’s loan application and fraudulently overstating the value of the property. The defendant’s first argument failed. The court noted that this section of CROA does not limit liability exclusively to credit repair organizations, and instead provides that [N]o person may … make any statement, or counsel or advise any consumer to make any statement, which is untrue or misleading … with respect to any consumer’s credit worthiness, credit standing, or credit capacity…. 15 U.S.C. § 1679b(a). Relying on case law in the Northern District of Illinois, the court held that even where a plaintiff cannot prove that the defendant is a credit repair organization within the meaning of section 1679a(3)(A) of the CROA, the plaintiff potentially can nevertheless state a claim … under section 1679b of the CROA. The defendant’s second argument was more persuasive. The defendants argued that the CROA claim must be dismissed because Plaintiffs have effectively alleged that that the defendant loan brokers violated CROA when they made untrue or misleading statements in the loan application, and then gave those statements to itself to process the loan. They said it is inconsistent with a logical reading of the statute that a person can be guilty of violating the statute for making a false representation to itself. The court agreed relying on the plain language of the statute that prohibits a person from making false representations to _another _about a consumer’s creditworthiness or capacity. The court said it was unwilling to establish such a novel precedent.
Author
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Solomon has nearly two decades of experience representing financial institutions, real estate investors and privately owned business entities. Solomon concentrates his practice in the areas of banking, consumer financial services, real estate, business law and related litigation and appellate practice.
