Thomas v. LVNV Funding LLC et al
Filing
52
MEMORANDUM Opinion and Order signed by the Honorable Elaine E. Bucklo on 11/21/2022. Mailed notice. (mgh, )
Case: 1:21-cv-01948 Document #: 52 Filed: 11/21/22 Page 1 of 7 PageID #:1424
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Valerie Thomas,
Plaintiff,
v.
LVNV Funding, LLC, and
Resurgent Capital Services,
L.C.,
Defendants.
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No. 21 CV 1948
MEMORANDUM OPINION AND ORDER
Valerie Thomas sued defendants for violation of the Fair Debt
Collection Practices Act (FDPCA), 15 U.S.C. § 1692 et seq., claiming
that they shared false information regarding her alleged debt with
the credit reporting agency, TransUnion. The parties have filed
cross-motions for summary judgment. For the reasons that follow,
defendants’ motion is denied, and plaintiff’s motion is granted.
The material facts of this case are undisputed. Plaintiff
incurred a consumer debt, and her account went into default after
she became unable to pay it. LVNV later became the owner of the
defaulted debt, and Resurgent was the servicer responsible for
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collection.1 After Resurgent began collection efforts, plaintiff
consulted attorneys, who on January 21, 2021, sent a letter to
defendants stating that “the amount reported is not accurate.” Pl.’s
L.R. 56.1 Stmt. at ¶¶ 17-18. Defendants received the letter on
February
1,
2021.
On
February
3,
2021,
defendants
reported
plaintiff’s debt to TransUnion but failed to note that the debt was
disputed.
TransUnion,
in
turn,
communicated
information
about
plaintiff’s debt to additional third parties, including Equifax,
Experian, and several of plaintiff’s creditors.
The next reporting cycle for plaintiff’s account closed on March
3, 2021. At that time, defendants correctly reported that her debt
was disputed. Defendants explain that although Resurgent received
plaintiff’s dispute letter on February 1, 2021, “no one was able to
analyze, process, and review” it until February 4, 2021, by which
time it had already reported the debt to TransUnion. According to
Resurgent’s Rule 30(b)(6) witness, it can take up to seven business
days for Resurgent’s credit review team to review a dispute letter
that it receives, and information about a disputed debt may be
communicated to third parties in the interim. Holladay Dep., ECF 362, at 67. That is indeed what happened in this case: following
Resurgent’s processes, the dispute team “did what they were supposed
to do, notating the account as disputed” in the next reporting cycle.
Plaintiff asserts that LVNV “purchased” the debt, while defendants
state that LVNV was “assigned ownership” of it. The distinction is
immaterial.
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Heatherly Dep. at 39, ECF 40, 118-119. Resurgent has no policy for
correcting, between monthly reporting cycles, information it learns
was false when provided. Id. at 119.
The FDCPA prohibits the communication of “credit information
which is known or which should be known to be false, including the
failure to communicate that a disputed debt is disputed.” 15 U.S.C.A.
§ 1692e.
When
a
debt
collector
receives
a
dispute
letter
but
communicates information about the debt to a credit reporting agency
without noting that the debt is disputed, it violates the statute.
Evans v. Portfolio Recovery Assocs., LLC, 889 F.3d 337, 346 (7th
Cir. 2018). The debt collector is liable unless it can establish one
of the statute’s affirmative defenses, including that the violation
was the result of a bona fide error.
Defendants
argue
that
they
did
not
communicate
false
information regarding plaintiff’s debt because although in receipt
of plaintiff’s dispute letter at the time they reported the debt on
February 3, 2021, they did not know of the dispute until the letter
was processed the following day. This argument does not survive
scrutiny because “[i]n the Seventh Circuit, the FDCPA is a ‘strict
liability statute.’” Bass v. I.C. Sys., Inc., 316 F. Supp. 3d 1047,
1051 (N.D. Ill. 2018) (quoting Wahl v. Midland Credit Mgmt., Inc.,
556 F.3d 643, 646 (7th Cir. 2009)). Plaintiff is not required to
show scienter. Francisco v. Midland Funding, LLC, No. 17 C 6872,
2019 WL 1227791, at *2 (N.D. Ill. Mar. 15, 2019). See also Valenta
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v. Midland Funding, LLC, No. 17 C 6609, 2019 WL 1429656, at *4 (N.D.
Ill. Mar. 29, 2019) (“Debt collectors may not make false claims,
period.”), quoting Randolph v. IMBS, Inc., 368 F.3d 726, 730 (7th
Cir. 2004)).
Valenta is instructive. There, a debt collector received and
processed a consumer’s fax disputing a debt on a Monday, and it
reported the debt to a credit reporting agency the following Friday
without indicating that the debt was disputed. The debt collector
explained that by the time it processed the consumer’s fax, it “had
already finalized its list of disputed accounts for that week.” Id.,
2019 WL 1429656, at *1 (N.D. Ill. Mar. 29, 2019). Rejecting the
defendant’s invitation to read a “reasonableness” provision into the
FDCPA that would give providers of information a seven-day grace
period, the court held that the debt collector violated the text of
§ 1692e.
The scenario here is comparable: despite actually receiving
plaintiff’s letter on February 1, 2021, defendants ask me to hold
that for purposes of § 1692e, they should be deemed to have received
the dispute when Resurgent processed plaintiff’s letter on February
4, 2021. By defendants’ reasoning, because they could not reasonably
have known about plaintiff’s dispute on February 3, they did not
communicate false information when they failed to indicate in their
report to TransUnion on that day that her debt was disputed. But
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this argument is at odds with the law of this circuit as explained
in Valenta and Francisco.
Nor can defendants establish the elements of the bona fide error
defense, which applies to “errors like clerical or factual mistakes.”
Valenta, 2019 WL 1429656, at *4 (N.D. Ill. Mar. 29, 2019). To prevail
on this defense, defendants must show (1) that the presumed FDCPA
violation was not intentional; (2) that the presumed FDCPA violation
resulted
from
a
bona
fide
error;
and
(3)
that
it
maintained
procedures reasonably adapted to avoid any such error.” Evans, 889
F.3d at 349 (internal quotation marks and citation omitted). Here,
the defense falters at the gate since defendants do not claim to
have made any error at all. To the contrary, Resurgent’s 30(b)(6)
witness
testified
that
plaintiff’s
debt
was
communicated
to
TransUnion consistently with company policy. Heatherly Dep., ECF 40,
at 39. The failure to report plaintiff’s dispute was not the result
of a technological glitch or a mistake by an individual employee; it
was the product of a policy that “tolerates the risk of violating 15
U.S.C. § 1692e(8) exactly as it did here.” Francisco 2019 WL 498936,
at *5. In Francisco (which addressed the same policy examined in
Valenta) the court explained:
Locking in reports on Monday and delivering them on Friday
means that every dispute received or processed on Tuesday,
Wednesday, Thursday, and Friday of the reporting week (of
which there are likely thousands) might not be noted in
Friday’s report to credit bureaus. Francisco’s letter fell
through the cracks because MCM designed a system with
cracks. No reasonable jury could find that MCM’s procedure
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was “reasonably adapted to avoid” the error that occurred
in this case.
Id. So too, in this case, Resurgent’s system tolerates the
communication of false information in cases where disputes
arrive at its doorstep at the close of its monthly reporting
periods,
and
it
lacks
procedures
for
promptly
correcting
information it later discovers was false at the time it was
communicated to a third party.2
Defendants’ final argument—that plaintiff lacks standing
because she cannot show any negative impact on her credit score
as a result of defendants’ false reporting—flies in the face of
Ewing v. MED-1 Sols., LLC, 24 F.4th 1146, 1154 (7th Cir. 2022).
In Ewing, the court held that when a debt collector provides
false credit information about a consumer to a credit reporting
agency,
the
consumer
suffers
“an
intangible,
reputational
injury that is sufficiently concrete for purposes of Article
III
standing.”
In
other
words,
plaintiff’s
constitutional
standing does not depend on proof of damage to her credit score.
I am not persuaded by defendants’ argument they had no affirmative
duty to update credit information they previously provided to reflect
plaintiff’s dispute. The cases they cite for this argument involved
disputes that arose after the debt collector reported the debt. See,
e.g., Gordon v. Syndicated Off. Sys., LLC, No. 16 C 4440, 2017 WL
1134489, at *3 (N.D. Ill. Mar. 27, 2017) (rejecting argument that
debt collectors have a continuing duty “to advise consumer reporting
agencies that a debt has been disputed, even when the dispute occurs
after the debt collector reports the debt and the debt collector has
not reported the debt since the dispute.”). In these cases, the
information was not false at the time it was communicated.
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For the foregoing reasons, defendants’ motion for summary
judgment is denied. The arguments defendants raise in response
to plaintiff’s cross-motion are identical to those rejected
above. Because nothing in defendants’ submissions controverts
plaintiff’s evidence that defendants violated the FDCPA by
communicating false information concerning her alleged debt to
TransUnion on February 3, 2021, plaintiff’s motion for summary
judgment as to liability is granted.
ENTER ORDER:
_____________________________
Elaine E. Bucklo
United States District Judge
Dated: November 21, 2022
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