Adetayo v. Fed Loan Servicing et al

Filing 34

MEMORANDUM OPINION. Signed by Judge Richard G. Andrews on 6/27/2018. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
ADETAYO ADESEYE ,
Plaintiff,
Civil Action No. 17-1126-RGA

V.

FEDLOAN SERVICING , et al. ,
Defendants.

Adetayo Adeseye , Newark, Delaware ; Pro Se Plaintiff.
Douglas D. Herrmann, Esquire, Pepper Hamilton LLP, Wilmington , Delaware , Counsel
for Defendant Fed Loan Servicing.
Blake A. Bennett, Esquire , and Heather M. Shumaker, Esquire, Cooch and Taylor,
Wilmington , Delaware , Counsel for Defendant Trans Union.
Karen M. Grivner, Esquire, Clark Hill PLC, Wilmington , Delaware, Counsel for
Defendant Equifax.
Travis S. Hunter, Esquire, and Mark C. Zheng , Esquire, Richards Layton & Finger, PA,
Wilmington , Delaware, Counsel for Defendant Experian .

MEMORANDUM OPINION

7,

June }
2018
Wilmington , Delaware

A
~~lt~;:
Plaintiff Adetayo Adeseye , who proceeds prose , and has paid the filing fee , filed
this action on August 11 , 2017. (D.I. 2). Before the Court is Defendant Pennsylvania
Higher Education Assistance Agency, d/b/a FedLoan Servicing's motion to dismiss
pursuant to Rule 12(b)(6). (D.I. 21 ). Briefing on the matter is complete. Also before the
Court is Plaintiffs request for counsel. (0.1. 14).

BACKGROUND
Plaintiff has sued a number of entities for inaccurate reporting of his student
loans to credit reporting agencies. Plaintiffs student loans were originally with Direct
Loans and the loan was set up on automatic repayment so Plaintiff would receive a
0.25% reduction in the interest rate. Prior to refinancing all student loans and
consolidating them, the loans were in forbearance. Plaintiff was informed by Direct
Loans that the automatic payments were in effect and would continue after the
forbearance period ended.
The student loans were transferred from Direct Loans to the U.S. Department of
Education. Plaintiff alleges he never received a notice or a phone call about the
transfer, and there appears to have been a lack of communication across many
handoffs during the transfer process to the Department of Education and FedLoan
Servicing that violated the Fair Credit Reporting Act.
Plaintiff alleges that, from 2012 until 2017, FedLoan Servicing and the
Department of Education inaccurately reported his student loan status to credit reporting
agencies, causing him actual damage. Plaintiff filed a complaint through CEPB

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(presumably the Consumer Financial Protection Bureau) and Federal Student Aid on
June 14, 2017, and recently Fedloan Servicing updated Plaintiff's credit report to reflect
a zero balance. However, some student loans are being reported by the Department of
Education with a total remaining balance of $32 .00 .
Plaintiff alleges that due to the erroneous reporting of a defaulted federal student
loan on his credit report, he has been unable to refinance or obtain a new mortgage.
He seeks compensatory damages.
Fedloan Servicing moves for dismissal of the Fair Credit Reporting Act ("FRCA")
claims pursuant to Rule 12(b )(6) on the grounds that it is not a consumer reporting
agency and there is no private right of action against data furnishers. 1 (D.I. 23).

LEGAL STANDARDS
In reviewing a motion filed under Fed. R. Civ. P. 12(b)(6), the court must accept
all factual allegations in a complaint as true and take them in the light most favorable to
plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007). Because Plaintiff proceeds

prose , his pleading is liberally construed and his complaint, "however inartfully pleaded ,
must be held to less stringent standards than formal pleadings drafted by lawyers ." Id.
A Rule 12(b )(6) motion maybe granted only if, accepting the well-pleaded allegations in
the complaint as true and viewing them in the light most favorable to the complainant, a

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Fed Loan Servicing also moves to dismiss claims raised under the Telephone
Consumer Protection Act and the Fair Debt Collection Practices Act, to the extent it was
Plaintiff's intent to raise these claims. Plaintiff indicates in his reply that he only raises a
FCRA claim against Fedloan Servicing. (D. I. 28). Therefore , that is the only claim I
will address.
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court concludes that those allegations "could not raise a claim of entitlement to relief."
Bell At/. Corp. v. Twombly, 550 U.S. 544, 558 (2007).

"Though 'detailed factua l allegations' are not required , a complaint must do more
than simply provide 'labels and conclusions' or 'a formulaic recitation of the elements of
a cause of action. "' Davis v. Abington Mem 'I Hosp. , 765 F.3d 236 , 241 (3d Cir. 2014)
(quoting Twombly, 550 U.S. at 555). I am "not required to credit bald assertions or legal
conclusions improperly alleged in the complaint. " In re Rockefeller Ctr. Props., Inc. Sec.
Litig. , 311 F.3d 198, 216 (3d Cir. 2002). A complaint may not be dismissed, however,

"for imperfect statement of the legal theory supporting the claim asserted ." Johnson v.
City of Shelby, 135 S. Ct. 346 , 346 (2014).

A complainant must plead facts sufficient to show that a claim has "substantive
plausibility. " Id. at 347. That plausibility must be found on the face of the complaint.
Ashcroft v. Iqbal, 556 U.S. 662 , 678 (2009). "A claim has facial plausibility when the

[complainant] pleads factual content that allows the court to draw the reasonable
inference that the [accused] is liable for the misconduct alleged. " Id. Deciding whether
a claim is plausible will be a "context-specific task that requires the reviewing court to
draw on its judicial experience and common sense." Id. at 679.
DISCUSSION
Fedloan Servicing seeks dismissal on the grounds that: (1) it is not a consumer
reporting agency; and (2) there is no private right of action against data furnishers for
merely reporting information even if the information is incorrect. Plaintiff responds that
by reporting inaccurate information, the credit reporting agencies cause him actual

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damages. To support his opposition, Plaintiff "adopts by reference the defenses,
criteria , limitations, standards and constitutional protection mandated or provided" for in
United States ex rel. Oberg v. Pennsylvania Higher Educ. Assistance Agency, 804 F.3d
646 (4th Cir. 2015);" Pele v. Pennsylvania Higher Educ. Assistance Agency, Civ. No.
2013-1451 (E.D . Va. Apr. 2, 2014) (D.I. 18); 2 and Hudson v. FedLoan Servicing, Civ.
No. 17-1568 (E.D. Mo. Apr. 3, 2018) (dismissed for failure to prosecute). The Court has
reviewed the foregoing authorities and none support Plaintiff's position .
Credit Reporting Agency. The allegations against Fedloan Servicing are that it

inaccurately reported information from 2012 until 2017 to credit reporting agencies.
Plaintiff does not allege that Fedloan Servicing is a credit reporting agency, and
Fedloan Servicing argues that it is not. Status as a credit reporting agency is an
element necessary to state a claim under§ 1681 i of the FCRA.
The FCRA, enacted in 1970, "created a regulatory framework governing
consumer credit reporting" that '"was crafted to protect consumers from the
transmission of inaccurate information about them , and to establish credit reporting
practices that utilize accurate , relevant, and current information in a confidential and
responsible manner."' Seamans v. Temple Univ. , 744 F.3d 853, 860 (3d Cir. 2014).
Under the FCRA, consumer reporting agencies, or credit bureaus, "collect consumer
credit data from 'furnishers,' such as banks and other lenders, and organize that
material into individualized credit reports , which are used by commercial entities to

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This ruling was reversed on October 21 , 2015. See Pele v. Pennsylvania Higher
Educ. Assistance Agency, 628 F. App'x 870 (4th Cir. 2015) (Pennsylvania Higher Educ.
Assistance Agency is not an arm of the Commonwealth entitled to sovereign immunity).
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assess a particular consumer's creditworthiness." Id. "Consumer reporting agencies
must 'follow reasonable procedures to assure maximum possible accuracy of the
information concerning the individual about whom the report relates, ' 15 U.S.C. §
1681 e(b ), and they are subject to suit by consumers under § 1681 i when they fail in this
regard." Harris v. Pennsylvania Higher Educ. Assistance Agency/Am. Educ. Servs. ,
696 F. App'x 87 , 90 (3d Cir. 2017).
In June 2017, the United States Court of Appeals for the Third Circuit affirmed
dismissal of a FCRA claim in another case against Defendant, stating that it "is not a
'consumer reporting agency' under the FCRA. . .. [It] operates nationally ...
conducting lending , servicing , and guarantee activities in connection with federallybacked student loans." Id. at 90 (citations omitted ). Moreover, the Complaint is devoid
of any allegations that Fedloan Servicing is a consumer reporting agency. Therefore,
the Court will grant the motion to dismiss to the extent Plaintiff attempts to raise a claim
under§ 1681 i.

Furnisher of Information. Fedloan Servicing also moves for dismissal to the
extent Plaintiff alleges it was a "furnisher" of information. Under the FCRA, those who
furnish information to consumer reporting agencies have two obligations: (1) to provide
accurate information, 15 U.S.C. § 1681 s-2(a), and (2) to undertake an investigation
upon receipt of a notice of dispute regarding credit information that is furnished , 15
U.S.C. § 1681 s-2(b ). Violations of the obligation to provide complete and accurate
information to consumer reporting agencies are not subject to a private cause of action
"in the first instance ," that is, before the consumer has disputed the information with a

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credit bureau . See Seamans, 744 F.3d at 864. The FCRA "explicitly precludes private
suits" for failure to comply with the duties set forth under 15 U.S .C. § 1681 s-2(a), and
"provides for enforcement of that provision by federal and state officials. " Seamans,
744 F.3d at 864.
Duties of the furnisher of the information are not imposed until the furnisher
receives notice from a consumer reporting agency, pursuant to 15 U.S.C. § 1681 i(a)(2),
that a consumer has disputed information furnished by that furnisher/creditor. See
Seamans, 744 F.3d at 864-65. Notice triggers the requirements of 15 U.S.C. § 1681s2(b). See id. The Complaint alleges that Plaintiff has been disputing inaccurate
information to credit reporting agencies since 2012 . There are no allegations, however,
that Fedloan Servicing received notice from any consumer credit reporting agency that
Plaintiff disputed information provided by it or that, if notified , it failed to properly
investigate. Plaintiff does allege that on June 14, 2017, he filed a complaint through the
CFPB and , after doing so , Fedloan Servicing updated his credit to reflect a zero
balance. However, this does not suffice to state a claim under§ 1681s-2(b) as the
CFPB is not a consumer reporting agency. See Harris, 696 F. App'x at 91 (Consumer
Financial Protection Bureau is an Executive agency established within the Federal
Reserve System to "regulate the offering and provision of consumer financial products
or services under the Federal consumer financial laws.").
As pied, Plaintiff has failed to state a claim upon which relief may be granted .
Therefore, the Court will grant the motion to dismiss the § 1681 s-2(b) claim. However,

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since it appears plausible that Plaintiff may be able to articulate a § 1681 s-2(b) claim , he
will be given an opportunity to amend his pleading .

Request for Counsel
Plaintiff filed a request to seek legal counsel, construed by the Court as a request
for counsel. (D.I. 14). Plaintiff proceeds prose. His request to proceed in forma

pauperis was denied on August 18, 2017 , and he has paid the filing fee. (D.I. 4 ).
Pursuant to 28 U.S.C. § 1915(e)(1 ), the court may request an attorney to represent any
personal unable to afford counsel. Section 1915(e)(1) confers the district court with the
power to request that counsel represent a litigant who is proceeding in forma pauperis.
Plaintiff paid the filing fee and was denied in forma pauperis status. He does not qualify
for counsel under§ 1915. Therefore , the court will deny the request.

CONCLUSION
Based upon the above discussion, the Court will: (1) deny Plaintiff's request for
counsel (D.I. 14); and (2) grant Defendant's motion to dismiss the complaint. (D.I. 21).
Plaintiff will be given leave to amend the 15 U.S.C. § 1681s-2(b) claim.
An appropriate order will be entered.

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