Chuluunbat v. Portfolio Recovery Associates, LLC et al

Filing 60

MEMORANDUM Opinion and Order: For the foregoing reasons, TransUnion's motion for judgment on the pleadings is granted. R. 47 . Signed by the Honorable Thomas M. Durkin on 2/17/2021. Mailed notice. (ecw, )

Case: 1:19-cv-08291 Document #: 60 Filed: 02/17/21 Page 1 of 10 PageID #:458

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNENSAIKHAN CHULUUNBAT,
Plaintiff,
v.

No. 19 C 8291

PORTFOLIO RECOVERY ASSOCIATES, LLC;
AND TRANSUNION DATA SOLUTIONS,
LLC.,

Judge Thomas M. Durkin

Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff Unensaikhan Chuluunbat brought this action against defendants
Portfolio Recovery Associates, LLC (“PRA”) and Trans Union, LLC (“TransUnion”),
incorrectly identified as TransUnion Data Solutions, LLC, for violation of the Fair
Credit Reporting Act (“FCRA” or the “Act”), 15 U.S.C. § 1681 et seq. TransUnion
moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). R.
47. For the following reasons, that motion is granted.
Legal Standard
Under Federal Rule of Civil Procedure 12(c), a party may move for judgment
on the pleadings “[a]fter the pleadings are closed—but early enough not to delay
trial.” The standard applied to motions under Rule 12(c) is the same standard applied
to dismissals under Federal Rule of Civil Procedure 12(b)(6). Buchanan-Moore v.
Cnty. of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009). The complaint must provide
“a short and plain statement of the claim showing that the pleader is entitled to

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relief.” Fed. Civ. P. 8(a)(2). Through this statement, defendants must be provided
with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007). This means the complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “‘A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct
alleged.’” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 366 (7th Cir. 2018)
(quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all wellpleaded facts as true and draws all reasonable inferences in favor of the non-moving
party. Tobey v. Chibucos, 890 F.3d 634, 646 (7th Cir. 2018).
Background
Mr. Chuluunbat incurred a debt on a consumer credit card issued by
Synchrony Bank (“the Debt”). R. 1 ¶ 11. Sometime in early 2019, PRA, a debt
collection agency, began reporting the Debt as though it was the owner. Id. ¶¶ 6, 1213. But according to the complaint, PRA did not own the Debt. 1 Id. ¶ 14. In September
2019, Mr. Chuluunbat sent a letter to PRA stating that its reporting was not accurate.
Id. ¶ 15. PRA responded later that month with certain documentation it said
evidenced the Debt’s validity. Id. ¶ 18. But the information did not demonstrate that

TransUnion’s reply brief indicates that PRA has since provided Mr. Chuluunbat
with the purchase agreement demonstrating that PRA does own the Debt.
1

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PRA owned the Debt, and PRA continued to furnish data regarding the Debt to each
of the major credit bureaus. Id. ¶¶ 19, 22.
In October 2019, counsel for Mr. Chuluunbat sent a letter to TransUnion, a
consumer reporting agency (“CRA”) that assembles and evaluates consumer credit
information for use in credit reports. Id. ¶¶ 9-10, 23. The letter asserted that PRA did
not own the Debt, and requested that it be removed from Mr. Chuluunbat’s credit
reports as inaccurate. Id. ¶¶ 23-24, 60. Shortly thereafter, TransUnion contacted PRA
about the dispute, and PRA responded via an automated consumer dispute
verification. 2 Id. ¶¶ 70, 72. TransUnion relied upon that verification without further
inquiry, continuing to include allegedly inaccurate information about the Debt on Mr.
Chuluunbat’s credit report without noting the dispute. Id. ¶¶ 71-74.
Mr. Chuluunbat asserts a claim against TransUnion under Sections 1681e(b)
and 1681i(a) of the FCRA for failure to conduct a reasonable and proper
reinvestigation into the allegedly inaccurate information on Mr. Chuluunbat’s credit
report, and/or delete the same information from his file. 3 Although not at issue here,
the complaint also asserts a claim against PRA for furnisher liability. TransUnion
now moves for judgment on the pleadings, arguing that the complaint fails to, and

An “automated consumer dispute verification” is an electronic form initiated by
CRAs on behalf of consumers that is then routed to the appropriate data furnisher
with any updated information on the consumers credit history. See Consumer Fin.
Prot. Bureau, Key Dimensions and Processes in the U.S. Credit Reporting System
(Dec. 2012), available at https://files.consumerfinance.gov/f/201212_cfpb_creditreporting-white-paper.pdf.
2

Mr. Chuluunbat’s complaint makes similar allegations with respect to Experian
Information Solutions, Inc., another CRA. But Mr. Chuluunbat voluntarily dismissed
Experian from the case. R. 25.

3

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indeed cannot as a matter of law, allege the kind of inaccuracy the FCRA requires it
to investigate and correct.
Analysis
Section 1681e(b) of the FCRA requires a CRA preparing a credit report to
“follow reasonable procedures to assure maximum possible accuracy of the
information concerning the individual about whom the report relates.” 15 U.S.C. §
1681e(b). If a consumer disputes information contained in his credit report, the CRA
must conduct “a reasonable reinvestigation to determine whether the disputed
information is inaccurate and record the current status of the disputed information,
or delete the item from the file.” Id. § 1681i(a). It follows that “[t]o state a claim under
the Act’s accurate reporting (§ 1681e) and reinvestigation provisions (§ 1681i), the
consumer must sufficiently allege that his credit report contains inaccurate
information.” Humphrey v. Trans Union LLC, 759 Fed. App’x 484, 488 (7th Cir. 2019)
(emphasis in original); Denan v. Trans Union, LLC, 959 F.3d 290, 294, 296 (7th Cir.
2020). But “CRAs are not a tribunal sitting to resolve legal disputes,” so they need
only investigate factual inaccuracies. Humphrey, 759 Fed. App’x at 488; see also
Denan, 959 F.3d at 295 (CRAs have no duty “to determine the legality of a disputed
debt”).
The FCRA does not define the scope of “inaccuracies” to which a CRA’s
obligations apply. But courts have construed factually inaccurate information for
purposes of the Act to include “inaccurate amounts, tradeline items not immediately
removed once vacated, and inaccurately updated loan terms.” See Rodas v. Experian

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Info. Sols., Inc., 2020 WL 4226669, at *2 (N.D. Ill. July 23, 2020) (citing Zahran v.
TransUnion Corp., 2003 WL 1733561, at *4 (N.D. Ill. Mar. 28, 2003)). On the other
hand, legal inaccuracies to which a CRA’s obligations do not apply include “the
validity of debt or a dispute regarding to whom the debt was assigned.” Id. (citing
Denan, 959 F.3d at 295 and Scheel-Baggs v. Bank of Am., 575 F. Supp. 2d 1031, 1042
(W.D. Wis. 2008)).
TransUnion argues that the complaint only lodges “improper collateral attacks
on the legal validity” of the Debt, and does not allege a factual inaccuracy. R. 47 at 1;
48 at 6. In response, Mr. Chuluunbat contends that his claim does not concern the
Debt’s validity at all; rather, it concerns whether PRA owns the Debt, an issue he
characterizes as “a pure question of fact” that TransUnion could resolve easily by
requesting proof of ownership from PRA. R. 52 at 1-2.
But TransUnion is not obligated to take that step, even assuming Mr.
Chuluunbat’s characterization of his claim is correct. Indeed, and as TransUnion
notes, several courts in this District have already held on near-identical facts—
including in a lawsuit brought by Mr. Chuluunbat himself—that the question of debt
ownership raises legal issues to which a CRA’s obligations under the FCRA do not
apply. And those courts uniformly disposed of claims against CRAs on that basis. See,
e.g., Chuluunbat v. Cavalry Portfolio Servs., LLC, 2020 WL 4208106, at *3 (N.D. Ill.
July 22, 2020) (granting CRA’s motion to dismiss and holding that ownership of the
debt at issue was a “mixed question of law and fact” to which the FCRA’s obligations
did not apply); Soyinka v. Equifax Info. Servs., LLC, 2020 WL 5530133, at *5 (N.D.

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Ill. Sept. 15, 2020) (granting CRAs’ motions to dismiss because plaintiff’s argument
over debt ownership was not a “discrete issue” that the CRAs could be expected to
resolve); Hoyos v. Experian Info. Sols., Inc., 2020 WL 4748142, at *3 (N.D. Ill. Aug.
17, 2020) (granting CRAs’ motions to dismiss and for judgment on the pleadings,
reasoning that until a court determined the legal issue of who owned plaintiff’s debt,
plaintiff could not assert ownership as a factual inaccuracy); Molina v. Experian Info.
Sols., Inc., 2020 WL 4748149, at *3 (N.D. Ill. Aug. 17, 2020) (granting CRA’s motion
for judgment on the pleadings on the same grounds); Sobenes v. TransUnion Data
Solutions, 2021 WL 214640, at *3 (disputed ownership of a debt “does not give rise to
a factual inaccuracy; rather, this is a defense to the debt, which must be resolved in
a lawsuit”).
In so holding, the courts relied largely upon the Seventh Circuit’s decision in
Denan, a case concerning the validity of debts incurred with online payday lenders at
exorbitant interest rates. 959 F.3d at 292-93. Instead of suing the lenders themselves,
the Denan plaintiffs sued the CRA for posting the debts. Id. at 293. But the court held
that CRAs are not tribunals equipped to resolve legal issues like debt validity, and
affirmed judgment for the CRA for plaintiffs’ failure to allege a factual inaccuracy
that it must investigate. Id. at 293, 295. The court explained that the FCRA imposes
obligations on furnishers (like PRA) and CRAs (like TransUnion) that are “consistent
with their respective roles in the credit reporting market.” Id. at 294. So while it made
sense to require furnishers to ensure that debt information accurately reflects
liability because “they assumed the risk and bear the loss of unpaid debt,” and “are

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in a better position to determine the legal validity of a debt,” the same could not be
said of CRAs, which simply collect and compile consumer information and then report
it to authorized users. Id. at 294-95.
Mr. Chuluunbat argues that the courts that relied upon Denan to hold that a
dispute about debt ownership raises a legal, rather than factual, inaccuracy,
wrongfully expanded Denan’s otherwise “narrow” holding. R. 52 at 6. But the Court
disagrees. As in Denan, obligating TransUnion to resolve the ownership issue here
would involve multiple legal determinations, including “whether there exists an
instrument through which ownership of the debt was transferred to [PRA], whether
the instrument was properly executed, and whether the instrument is legally
enforceable.” Chuluunbat, 2020 WL 4208106, at *3. And “the power to resolve [these
issues] exceeds the competencies of the credit reporting agencies.” Id.; see also Juarez
v. Experian Info. Sols., Inc., 2020 WL 5201798, at *4 (N.D. Ill. Aug. 31, 2020)
(“[w]hether [the furnisher] has sufficient evidence to demonstrate that it owns the
Debt under applicable state law is precisely the type of decision for a court to make
in a lawsuit between [the furnisher] and [the consumer]”).
Mr. Chuluunbat next argues that the district court cases run afoul of the
Seventh Circuit’s holding in Chemetall GMBH v. ZR Energy, Inc., 320 F.3d 714 (7th
Cir. 2003). But while the court in Chemetall held that the assignment of a right is “a
manifestation of the assignor’s intention to transfer” and intent is “a question of fact,”
that case concerned a contract claim, not the FCRA. 320 F.3d at 720-21. And courts
considering FCRA claims have declined to follow the logic of decisions that do not

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implicate the Act. And for good reason; the determination is context-specific. See
Soyinka, 2020 WL 5530133, at *4 (explaining that Chemetall was deceiving because
“the contours of the law-fact distinction vary depending on context”); Amorah v.
Equifax Info. Servs., LLC, 2020 WL 6565220, at *3 (N.D. Ill. Nov. 9, 2020)
(“Assignment of a right may have been a question of fact [in Chemetall], but that
conclusion doesn’t map onto Amorah’s case. An issue might present a fact question in
another context, but still exceed the competency of a credit reporting agency for
purposes of the FCRA’s accuracy requirement.”); Cowans v. Equifax Info. Servs., LLC,
2020 WL 7042900, at *3 (N.D. Ill. Nov. 30, 2020) (declining to follow the logic of
another breach of contract decision that involved ownership of a corporation, not a
debt); see also Chuluunbat, 2020 WL 4208106 at *3 (same).
Mr. Chuluunbat also points to several decisions outside of this District to
support his claim that debt ownership is a simple question of fact. But none are on
point or particularly persuasive. Indeed, both Ohlson v. Cadle Co., 2006 WL 721505
(E.D.N.Y. Mar. 21, 2006) and Johns v. Wells Fargo Bank, N.A., 2015 WL 9238957
(S.D. Ala. Dec. 17, 2015) concerned Fair Debt Collection Practices Act claims against
debt purchasers, not CRAs. And the Illinois state court case Mr. Chuluunbat cites
considered bank account ownership in the context of a recovery citation proceeding,
not a CRA’s obligations under the FCRA. See Farrahkan v. First Pac. Bank, 463
N.E.2d 732, 734 (Ill. App. Ct. 1984).
Next, Mr. Chuluunbat cites two district court cases from Missouri: Campbell
v. Experian Information Solutions, Inc., 2009 WL 3834125 (W.D. Mo. Nov. 13, 2009),

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and Murphy v. Midland Credit Management, Inc., 456 F. Supp. 2d 1082 (E.D. Mo.
Oct. 11, 2006)). But although both were brought under the FCRA, as Mr. Chuluunbat
acknowledges, their “focus [was] on a consumer’s dispute of the debtor-side ownership
of the account.” R. 52 at 8. Moreover, the defendants did not argue that the dispute
at issue “was a legal inaccuracy not governed by § 1681e(b) or § 1681i(a),” “so there
was no reason for the courts . . . to consider that argument.” Juarez, 2020 WL
5201798, at *4.
Finally, Mr. Chuluunbat suggests that judgment for TransUnion would
“unreasonably limit[ ] the scope of consumer disputes under the FCRA,” such that
“the entire purpose of the statute is subverted.” R. 52 at 8. But the Court does not
perceive this to be the case; indeed, the proper avenue for relief is via a suit against
PRA, not the CRA. Juarez, 2020 WL 5201798 at *4.
In sum, the Court agrees with the numerous other courts in this District that
have held that unless and until “a court concludes that [PRA] does not own [Mr.
Chuluunbat’s] debt,” and TransUnion continues to report that it does, Mr.
Chuluunbat “cannot pursue claims under . . . the FCRA on the basis that
[TransUnion’s] report of ownership is inaccurate.” Harris v. Equifax Info. Serv., LLC,
2020 WL 66489, at *5 (Jan. 7, 2021) (citing Molina, 2020 WL 4748149, at *3).
Accordingly, judgment for TransUnion is proper.
Conclusion
For the foregoing reasons, TransUnion’s motion for judgment on the pleadings
is granted. R. 47.

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ENTERED:

______________________________
Honorable Thomas M. Durkin
United States District Judge
Date: February 17, 2021

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