Barton v. Ocwen Loan Servicing, LLC et al
Filing
96
MEMORANDUM OPINION AND ORDER. IT IS HEREBY ORDERED that Defendant Ocwen Loan Servicing LLC's Motion for Summary Judgment 70 is DENIED.(Written Opinion). Signed by Chief Judge Michael J. Davis on 10/25/13. (GRR)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Kate Barton,
Plaintiff,
v.
MEMORANDUM OPINION
AND ORDER
Civil No. 12‐162 (MJD/JJG)
Ocwen Loan Servicing LLC,
Defendant.
____________________________________________________________________
Thomas J. Lyons, Jr., Consumer Justice Center, P.A., Counsel for Plaintiff.
David R. Mortensen, Wilford, Geske & Cook, P.A., Counsel for Defendant
Ocwen Loan Servicing, LLC.
____________________________________________________________________
This matter is before the Court on Ocwen Loan Servicing LLC’s (“Ocwen”)
motion for summary judgment.
I.
Background
On September 30, 2005, Plaintiff entered into two loans ‐ a first mortgage in
the amount of $148,000 and a second mortgage in the amount of $37,000 ‐ both
secured by property located at 1185 Hillcrest Ct., Woodbury, Minnesota.
(Affidavit of Eudiel Tovar ¶¶ 6, 7 (Doc. No. 12).) Saxon Mortgage Services, Inc.
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(“Saxon”)1 serviced the first mortgage from August 2008 until the property was
sold following foreclosure on October 8, 2010. (Id. ¶¶ 6, 21.) HomeEq Servicing
(“HomEq”) serviced the second mortgage until August 31, 2010, after which time
Ocwen began servicing that loan. (Mortensen Declaration, Ex. 1 (Ex. 13 to
Deposition of Plaintiff) (Letter from HomEq notifying Plaintiff that the servicing
of the loan would be transferred to Ocwen as of 9/1/2010).)
On October 15, 2008, Plaintiff filed a voluntary petition pursuant to
Chapter 7 of the Bankruptcy Code. (Steinlage Declaration, Ex. A (Doc. No. 11‐1).)
In her bankruptcy proceeding, Plaintiff filed a “Chapter 7 Individual Debtor’s
Statement of Intention ‐ Amended” in which she stated her intention to “retain
collateral and continue to make regular payments” on the first and second
mortgages to her home. (Tovar Aff., Ex. 2 (Doc. No. 12‐1).) The Bankruptcy
Court issued a discharge order in Plaintiff’s bankruptcy on January 30, 2009.
(Steinlage Decl., Ex. B (Doc. No. 11‐1).) Plaintiff did not, however, execute a
formal reaffirmation agreement with respect to these mortgages. As a result,
both mortgages were included in the discharge, and Plaintiff was no longer
1
Based on Saxon’s and Plaintiff’s stipulation to dismiss, this Court entered an order
dismissing Saxon as a defendant on March 5, 2013.
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personally liable for such debts. The parties do not dispute that the debt at issue
in this case was discharged in bankruptcy.
Following the bankruptcy discharge, Plaintiff remained in her home and
sought a loan modification from Saxon. (Mortensen Decl., Ex. 1 (Barton Dep. at
25‐26, Dep. Ex. 5).) Plaintiff testified that she was offered a loan modification, but
the resulting payment was not low enough for her to be able to stay in the home.
(Id. at 30.) She then decided to sell the home in a short sale. (Id. at 28‐30.)
To assist with such a sale, Plaintiff faxed to HomEq an authorization to
allow her real estate agent “to receive all information pertaining to my loan.” (Id.
(Barton Dep. Ex. 6).) She also provided HomEq a number of documents
concerning a short sale of her home. (Id. (Barton Dep. at 28‐41, Dep. Exs. 6‐12).)
Plaintiff did receive an offer to purchase her home for $116,800. (Id. (Barton Dep.
Ex. 12).) The short sale was never completed, however. (Tovar Aff. ¶ 20.)
In September 2010, Ocwen asserts it pulled Plaintiff’s credit report to check
the status of the first mortgage. (Lyons Decl. Ex. 1 (Deposition of Rashad
Blanchard at 48, Dep. Ex. 19 at Plaintiff 0051).) The parties agree that Plaintiff
spoke with an Ocwen representative by phone on two occasions in October 2010.
(Mortensen Decl. Ex. 1 (Barton Dep. at 73).) Ocwen asserts that on both
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occasions, Plaintiff initiated contact with Ocwen to inform Ocwen that she had
filed for bankruptcy, and that she did not want to receive any more phone calls
concerning the loan that Ocwen was servicing. (Ocwen Aff ¶¶ 4, 5 (Doc. No.
91).) In response to her request, Ocwen placed Plaintiff on a “do not call” list,
and no further telephone contact took place after October 21, 2010. (Id.) Ocwen
pulled Plaintiff’s credit report two more times, on April 28, 2011 and July 27,
2011. (Blanchard Dep. Ex. 19 at Plaintiff 0102.)
From February through September 2011, several account statements were
sent to Plaintiff by Ocwen concerning the second mortgage loan. (Mortensen
Decl. Ex. 1 (Barton Dep. at 66‐68, Ex. 21).) These statements included information
as to the current principal balance of the second mortgage, the interest rate and
the current amount due. (Id.) On the back of these statements was a bankruptcy
disclaimer that reads “If you or your account are subject to a pending bankruptcy
or your obligation referenced in this statement has been discharged in
bankruptcy, this statement is for informational purposes only and is not an
attempt to collect a debt.” (Id.) These statements were sent despite being
informed by Plaintiff in October 2010 that she had filed for bankruptcy and that
the debt had been discharged. In addition, Ocwen continued to send reports to
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credit bureaus that the account on the second mortgage was past due through
October 2011. (Lyons Decl., Ex. 1 (Blanchard Dep. at 93‐94, 96‐98, Ex. 5 at
OCWEN 525 (lines 47 and 48), OCWEN 524 (lines 31, 34, 39 and 43), OCWEN 523
(lines 13, 14, 18, 21, 24 and 28).)
Plaintiff claims that as a result of Ocwen’s actions, she was denied
competitive rates on a vehicle loan in September 2011. (Mortensen Decl., Ex. 1
(Barton Dep. at 59).) She further claims that she has suffered from emotional
distress as a result of the adverse effect Ocwen’s conduct has had on her. (Id. at
74 (conversations with Ocwen were very upsetting), Barton‐McCorkle
Declaration ¶¶ 6‐11 (describing frustration over Ocwen’s ability to listen and
work with Plaintiff, feeling distraught, distressed and helpless), ¶ 15 (stating she
suffered physical, as well as emotional distress because of Ocwen’s actions), ¶ 18
(describing many restless and sleepless nights because of Ocwen’s actions), ¶ 19
(family activities were affected by the stress caused by Ocwen’s actions.)2
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Ocwen filed an objection to Plaintiff’s declaration, asserting the statements therein
conflicted with her deposition testimony. The Court finds that Plaintiff’s deposition testimony
does not conflict with the statements set forth in her declaration ‐ as those statements simply
expound on the emotional distress she alleges resulted from Ocwen’s actions. Accordingly,
Ocwen’s objections to the declaration are overruled.
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In her Complaint, Plaintiff asserted a number claims, some of which have
since been dismissed. The remaining claims against Ocwen are: Count I ‐
violation of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681b(f) by
accessing Plaintiff’s credit history without a permissible purpose; Count II ‐
Violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692;
Count IV ‐ invasions of privacy by intrusion upon seclusion; and Count V ‐
Credit Defamation.
II.
Standard for Summary Judgment
Summary judgment is appropriate if, viewing all facts in the light most
favorable to the non‐moving party, there is no genuine dispute as to any material
fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322‐23 (1986). The party seeking
summary judgment bears the burden of showing that there is no disputed issue
of material fact. Celotex, 477 U.S. at 323. “A dispute is genuine if the evidence is
such that it could cause a reasonable jury to return a verdict for either party; a
fact is material if its resolution affects the outcome of the case.” Amini v. City of
Minneapolis, 643 F.3d 1068, 1074 (8th Cir. 2011) (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248, 252 (1986)).
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III.
Analysis
A.
Fair Credit Reporting Act
It is unlawful for a person to use or obtain a consumer report for any
purpose unless the report is obtained for a permissible purpose. 15 U.S.C. §
1681b(a). Permissible purposes for accessing a credit report include, but are not
limited to, a person seeking a credit report in connection with a possible credit
transaction involving the extension of credit to, or review or collection of an
account of the consumer, or for an otherwise legitimate business need to review
an account to determine whether the consumer continues to meet the terms of the
contract. 15 U.S.C. § 1681b (a)(3)(A) and (F)(ii). “Whether a permissible purpose
existed is a question of law.” Breese v. TRIADvantage Credit Servs., Inc., 393 F.
Supp. 2d 819, 821 (D. Minn. 2005).
Plaintiff claims that on multiple occasions, Ocwen obtained a copy of her
credit report without a permissible purpose in violation of the FCRA, because
each time Ocwen accessed her report, Plaintiff’s bankruptcy had been discharged
and she was no longer personally liable for the second mortgage on the
Woodbury home.
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Ocwen argues that it had a permissible purpose in accessing and using
Plaintiff’s credit reports because it had a reasonable, good faith belief that it had a
credit relationship with Plaintiff as evidenced by: the signed Statement of Intent
filed in her bankruptcy proceeding that Plaintiff would continue to live in the
home and pay on the second mortgage; documents sent to HomEq requesting a
loan modification following the discharge of her bankruptcy; documents that
Plaintiff sought to be considered for a short sale of the home; and evidence that
Plaintiff made post discharge payments on the mortgages.
Ocwen concedes that the second mortgage was discharged in bankruptcy,
but for purposes of Plaintiff’s FCRA claim, Ocwen asserts that FCRA does not
define “credit relationship” as one requiring personal liability. Instead, as long as
the party obtaining the credit report has reason to believe a permissible purpose
exists, there is no violation of FCRA. Ocwen further argues that this Court has
already found that a credit relationship existed, citing to this Court’s Order
denying Ocwen’s and Saxon Mortgage Services, Inc.’s motions to dismiss and/or
summary judgment. (Doc. No. 41 at 11, ¶ 2.)
Contrary to Ocwen’s assertions, this Court did not previously find a credit
relationship existed in this case between Ocwen and Plaintiff. The cited portion
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of the Order addresses Saxon’s alternative motion for summary judgment and
the facts supporting Plaintiff’s claims against Saxon, which are materially
different than the facts supporting the claim against Ocwen; the most important
of which is the fact that Saxon serviced both mortgages prior to and after
Plaintiff’s bankruptcy. In denying the motion, the Court found “On this record,
the Court finds that summary judgment is not appropriate as the Plaintiff
disputes whether a credit relationship existed. Therefore, the record needs to be
developed as to whether and when Plaintiff made voluntary payments on the
first and second mortgages following the discharge in bankruptcy, and the
substance of communications between the parties with regard to the mortgages.”
The Court made no finding that a credit relationship existed, and Ocwen’s
reliance on the Order for such a proposition is misplaced.
A party that has accessed a credit report may not violate FCRA if such
party had a good faith belief that it had a permissible purpose to do so. See
Miller v. Rubin & Rothman, LLC, Civ. No. 10‐2198 (MJD/JJK), 2011 WL 4359977,
at *3 (D. Minn. Sept. 19, 2011); Beckstrom v. Direct Merch.’s Credit Card Bank,
Civ. No. 04‐1351 (ADM/RLE), 2005 WL 1869107, at * 3 (D. Minn. Aug. 5, 2005). In
making this determination, the Court should consider the intent of the party
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accessing the report. Miller, 2011 WL 435997, at *3.
The evidence in this case establishes that Ocwen took over the servicing of
the second mortgage as of September 1, 2010. One week later, it conducted what
appears to be a hard inquiry of Plaintiff’s credit report. (Blanchard Dep. Ex. 19 at
Plaintiff 0050‐51.) The purpose for this inquiry was to determine the status of the
first mortgage. (Blanchard Dep. at 48.) There is no evidence in the record that
Ocwen had actual knowledge of the fact that Plaintiff’s personal liability on the
second mortgage had been discharged in January 2009 when that first credit pull
was completed in September 2010. Instead, Ocwen asserts that it only knew that
after January 2009, Plaintiff continued to make some payments on the first and
second mortgages and that Plaintiff sought a loan modification and a short sale
of the home. However, Ocwen, in its motion for summary judgment, argues that
its good faith belief that a credit relationship existed is supported by the
Statement of Intent that she signed in January 2009 as part of her bankruptcy
proceeding. (Ocwen Brief in Support of S.J. at 24.) If Ocwen had knowledge of
the Statement of Intent, then a fact question is raised as to whether Ocwen was
aware of her bankruptcy filing in September 2010, and whether it was aware that
her bankruptcy discharge included the second mortgage. Based on these facts,
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the Court finds that fact questions exist as to Ocwen’s good faith belief, in
September 2010, that a credit relationship existed with respect to the second
mortgage.
With respect to the credit pulls in 2011, it is clear that Ocwen knew of
Plaintiff’s bankruptcy. Plaintiff asserts she also informed Ocwen that the debt
had been discharged, while Ocwen asserts that Plaintiff refused to provide it the
name of her bankruptcy attorney. If Ocwen was informed that the debt had been
discharged, or given the name of Plaintiff’s bankruptcy attorney to verify the
discharge, Ocwen would not have had a permissible purpose to pull her report
in April and July 2011, as no credit relationship existed and there was no longer
any basis for a good faith belief that a credit relationship continued to exist. See
Godby v. Wells Fargo Bank, N.A., 599 F. Supp. 2d 934, 942 (S.D. Ohio 2008)
(finding that defendant did not have permissible purpose under FCRA to access
plaintiff’s credit report where the only transaction between the parties was a
mortgage loan that had been discharged in bankruptcy). Because there is a fact
question as to when Ocwen learned of the discharge, the Court cannot determine
at this time whether Ocwen had a permissible purpose to access Plaintiff’s credit
report in April and July 2011.
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Ocwen argues it is nonetheless entitled to summary judgment on the
FCRA claim as Plaintiff has failed to demonstrate that she was damaged when
Ocwen accessed her credit reports. There is some dispute as to whether the
September 8, 2010 credit pull was a soft or hard inquiry. A hard inquiry is where
the inquiry is visible to lenders and is used to determine creditworthiness.
Ocwen’ expert, John Ulzheimer, opined that such an inquiry is only a minor
factor (10%) in the overall determination to approve or deny credit. (Ulzheimer
Affidavit Ex. 1 at 8‐9.) Ulzheimer further opined that Plaintiff’s adverse credit
experience is based on her bankruptcy and numerous adverse credit lines not
associated with Ocwen. (Id. at 11‐14.) With respect to the credit pulls in April
and July 2011, it appears those pulls were soft inquiries ‐ inquiries that are not
shared with others. Ulzheimer opined that soft inquiries do not affect a credit
score, and therefore cannot be the basis for actual damages. (Ulzheimer Affidavit
Ex. 1 at 8.)
Plaintiff asserts that in September 2011, she was denied a car loan from
several lenders. (Barton Dep. at 59; Barton‐McCorkle Decl. ¶ 12.) After the
denials, Plaintiff reviewed her credit reports and learned that Ocwen had
accessed her reports and was illegally reporting that she was past due on a
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discharged debt. (Barton‐McCorkle Decl. ¶ 12.) Plaintiff asserts that because of
Ocwen’s actions she suffered actual damages as evidence by the denial of credit
for a car, and for emotional distress. She claims that as a result of Ocwen’s
actions, she was distraught to the extent that she was unable to care for her three‐
year‐old daughter, and that her daughter was affected because she was too
young to understand why her mother was crying and upset. (Id. ¶ 7.) She
further claims that because of Ocwen’s actions, she suffered physical and
emotional distress, and that she suffered from many sleepless nights and that her
family was unable to participate in family activities. (Id. ¶¶ 15, 18 and 19.)
Mental pain and anxiety can constitute actual damages and are recoverable
under FCRA where the plaintiff has presented competent evidence of actual
injury, such as “‘loss of sleep, nervousness, frustration and mental anguish’ as a
result of a ‘grossly inaccurate consumer report.’” Taylor v. Tenant Tracker, Inc.,
710 F.3d 824, 828 (8th Cir. 2013) (quoting Millstone v. O’Hanlon Reports, Inc., 528
F.2d 829, 834‐35 (8th Cir. 1976)).
The Court finds that Plaintiff has demonstrated genuine issues of fact with
regard to whether Ocwen’s violation of FCRA caused her actual damages.
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Plaintiff further asserts that damages are available for willful
noncompliance, which covers knowing and reckless violations of the FCRA.
Safeco Ins. of Am. v. Burr, 551 U.S. 47, 57 (2007). Under the standard set forth in
Safeco, a willful violation of the FCRA is one that includes a reckless act or
omission that created an unjustifiably high risk of violating a consumer’s rights.
Id. 551 U.S. at 69. If a defendant acted consistently with an objectively
reasonable, albeit incorrect, interpretation of the law, the defendant’s actions
were not willful. Id.
As set forth above, the Court finds that there is a fact question as to when
Ocwen became aware of the fact that the Plaintiff was no longer personally liable
for the second mortgage it agreed to service. In addition, if Ocwen knew that
Plaintiff had filed for bankruptcy, but did not follow up to determine if the debt
had been discharged, a reasonable jury could find that Ocwen willfully violated
Plaintiff’s FCRA rights when it pulled Plaintiff’s credit history when it knew or
should have known that the debt was discharged and that Ocwen would not
have a permissible purpose to pull the report. Accordingly, the Court will deny
Ocwen’s motion for summary judgment as to the FCRA claim.
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B.
Fair Debt Collection Practices Act
Plaintiff claims that Ocwen’s attempts to collect on a debt that was
discharged in bankruptcy is a violation of federal law, as the FDCPA prohibits
harassment or abuse, the use of false or misleading statements or unfair practices
when collecting a debt. 15 U.S.C. §§ 1692d, 1692e and 1692f. To recover damages
on a violation of the FDCPA, however, such claim must be brought within one
year from the day the violations occurred. 15 U.S.C. § 1692k(d). This action was
filed on January 20, 2012, therefore any communication from Ocwen prior to
January 20, 2011 cannot form the basis of Plaintiff’s FDCPA claim. Accordingly,
Plaintiff cannot base this claim on the two phone calls between Plaintiff and
Ocwen that took place in October 2010.
Plaintiff has also alleged that Ocwen sent her several letters from February
through September 2011, seeking to illegally collect on the discharged debt.
(Mortensen Decl., Ex. 1 (Barton Dep. Ex. 21).) Ocwen asserts these letters cannot
be construed as seeking to collect on a debt, because of the disclaimer language
on the back, which reads:
If you or your account are subject to a pending bankruptcy or your
obligation referenced in this statement has been discharged in bankruptcy,
this statement is for informational purposes only and is not an attempt to
collect a debt.
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(Id.)
In determining whether a communication is misleading or unfair, such
communication must be viewed through the eyes of an unsophisticated
consumer. Strand v. Diversified Collection Serv., Inc., 380 F.3d 316, 317‐18 (8th
Cir. 2004). Such questions are typically for a jury to decide. Viewing the facts in
the light most favorable to Plaintiff, the Court finds genuine issues of fact
preclude summary judgment in favor of Ocwen with respect to the claim under
the FDCPA. At a minimum, there are fact questions as to whether Ocwen sent
out these notices with the knowledge that the debt had been discharged in
bankruptcy. Under these circumstances, a reasonable juror could find that the
notices were an attempt to collect a debt through misleading statements or unfair
practices.
C.
Invasion of Privacy ‐ Intrusion Upon Seclusion
A claim for invasion of privacy, intrusion upon seclusion, will lie where
there is an “intrusion; that is highly offensive to a reasonable person; into some
matter into which a person has a legitimate expectation of privacy.” Swarthout
v. Mut. Serv. Life Ins. Co., 632 N.W.2d 741, 744 (Minn. Ct. App. 2001). “In the
context of intrusion upon seclusion, questions about ‘the reasonable person
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standard are ordinarily questions of fact, * * * but they become questions of law if
reasonable persons can draw only one conclusion from the evidence.’” Id. at 745
(quoting Hougum v. Valley Mem. Homes, 574 N.W.2d 812, 818 (N.D. 1998)).
The Court finds that Plaintiff has raised genuine issues of fact as to
whether Ocwen accessed her credit report with knowledge that Plaintiff’s debt
had been discharged in bankruptcy. On these facts, it is for the jury to decide
whether a reasonable person would be highly offended by Ocwen’s access to
private information such as her current credit status, her employment status,
address and other information contained within such report.
D.
Credit Defamation
A claim for credit defamation is limited by 15 U.S.C. § 1681h(e), which
provides:
Except as provided in sections 1681n and 1681o of this title, no consumer
may bring any action or proceeding in the nature of defamation, invasion
of privacy, or negligence with respect to the reporting of information
against any consumer reporting agency, any user of information, or any
person who furnishes information to a consumer reporting agency, based
on information disclosed pursuant to section 1681g, 1681h, or 1681m of this
title, or based on information disclosed by a user of a consumer report to or
for a consumer against whom the user has taken adverse action, based in
whole or in part on the report except as to false information furnished
with malice or willful intent to injure such consumer. (emphasis added)
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To demonstrate that information was furnished with malice or willful
intent, Plaintiff must provide evidence that Ocwen “acted with knowledge that it
was false or with reckless disregard of whether it was false or not.” Thornton v.
Equifax, Inc., 619 F.2d 700, 705 (8th Cir. 1980) (quoting New York Times Co. v.
Sullivan, 376 U.S. 254, 279–80 (1964)).
Ocwen asserts it is entitled to summary judgment on this claim as Plaintiff
has failed to demonstrate that Ocwen acted with malice or willful intent or that
Plaintiff suffered damages. As previously argued, Ocwen asserts that Plaintiff
has failed to establish a link between Ocwen’s conduct and injury to Plaintiff. In
addition, Ocwen asserts that Plaintiff has failed to demonstrate a fact issue as to
whether Ocwen acted with knowledge or reckless disregard of the fact that
Plaintiff no longer was personally liable for the second mortgage, given the fact
that Ocwen had documents setting forth Plaintiff’s initial intent to continue to
pay the mortgage payments after she filed for bankruptcy, the attempted short
sale, loan modification documents and post bankruptcy filing payments towards
the mortgages.
The Court finds that Plaintiff has produced evidence that she notified
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Ocwen of her bankruptcy filing and after that date, Ocwen reported to credit
bureaus that the account was past due and owing despite the fact that the house
had been sold by foreclosure in October 2010. (Lyons Decl. Ex. 1 (Blanchard Dep.
93‐94, 96‐98, 120‐21), Ex. 5 at OCWEN 525 at line 59 (October 19, 2010 notation
that Plaintiff had called informing Ocwen of her bankruptcy), OCWEN 524 at
line 39 (January 10, 2011 notation that account reported to credit bureau with a
past due amount), OCWEN 522 at line 9 (September 8, 2011 notation that account
reported to credit bureau with a past due amount).) See In re Torres, 367 B.R.
478, 487‐88 (Bankr. S.D.N.Y. 2007) (finding that a “credit report that continues to
show a discharged debt as ‘outstanding,’ ‘charged off,’ or ‘past due’ is
unquestionably inaccurate and misleading, because end users will construe it to
mean that the lender still has the ability to enforce the debt personally against the
debtor, that is, that the debtor has not received a discharge, that she has
reaffirmed the debt notwithstanding the discharge, or that the debt has been
declared non‐dischargeable.”). Accordingly, the Court finds there are genuine
issues of fact as to whether Ocwen reported to credit bureaus that Plaintiff’s
account was past due with an escalating balance with the knowledge that such
debt had been discharged in bankruptcy. Summary judgment on this claim must
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therefore be denied.
IT IS HEREBY ORDERED that Defendant Ocwen Loan Servicing LLC’s
Motion for Summary Judgment [Doc. No. 70] is DENIED.
Date: October 25, 2013
s/ Michael J. Davis
Michael J. Davis
Chief Judge
United States District Court
Civil No. 12‐162
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