Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in granting defendants-debt collectors’ motion for summary judgment in Fair Debt Collection Practices Act (FDCPA) action, alleging that defendants used false representations or deceptive means to collect on plaintiff’s alleged debt. Record showed that: (1) plaintiff was victim of identity theft when unknown third-party used plaintiff’s identity to obtain credit card; (2) third-party used credit card to obtain airplane ticket; and (3) defendants attempted to collect on unpaid credit card bill. While airline eventually agreed with plaintiff that he had not purchased airplane ticket, it initially told plaintiff that its investigation revealed that he had indeed purchased said ticket. Also, plaintiff failed to establish that defendants’ statements made in its collection letter were “false” for purposes of FDCPA, where plaintiff knew he had not purchased ticket, and thus knew that defendants’ letters were only sent in “error.” As such, because defendants’ letters to plaintiff would not have influenced plaintiff to pay debt, they were not “false” for purposes of FDCPA. Ct. also found that defendants did not violate Fair Credit Reporting Act, based on plaintiff’s claim that defendants should have performed more thorough investigation on his identity theft claim, where: (1) defendants were aware that airline had initially found that plaintiff had actually purchased ticket with credit card; and (2) defendants’ subsequent and repeated requests for more information about identity theft claim were appropriate, where vendor had already resolved identify theft claim against plaintiff.

Dist. Ct. did not err in reversing Bankruptcy Ct.’s order that found that defendant-former husband’s $435,000 debt to plaintiff-former wife that arose from arbitrator’s award in favor of plaintiff regarding plaintiff’s entitlement to portion of increase in defendant’s retirement savings that occurred after divorce was not dischargeable in defendant’s bankruptcy proceedings. Record supported defendant’s claim that said debt was dischargeable, since language of arbitrator’s award indicated that it was money judgment, as opposed to award of interest in specific property that would not be dischargeable. This is so, Ct. of Appeals reasoned, where: (1) arbitrator found that plaintiff was entitled to $435,000, plus post-judgment interest; (2) under Indiana law, any order requiring payment of sum of money and stating specific amount due is money judgment; and (3) under Indiana law, award of post-judgment interest applies only to money judgments and not judgments partitioning property. Ct. further noted that arbitrator’s award allowed defendant to choose how to satisfy award, which is consistent with finding that instant debt was money judgment. Fact that amount awarded was based on defendant’s retirement account, or that arbitrator stated that award was not dischargeable in bankruptcy did not require different result.

Dist. Ct. did not err in upholding Bankruptcy Ct.’s order, finding that plaintiff-lawyer/debtor in Chapter 7 bankruptcy proceeding could not discharge $12,500.04 in costs of his attorney disciplinary proceedings imposed by Wisconsin Supreme Ct., where such costs could properly be viewed as “penalty” under section 523(a)(7) of Bankruptcy Code. Ct. of Appeals rejected plaintiff’s contention that his disciplinary costs could not be viewed as either fine, penalty or forfeiture for purposes of section 523(a)(7) because said costs served only to compensate defendant for expenses it incurred in underlying disciplinary proceedings against him. Ct. found that instant prosecution expenses are part of expense of governing and are not undertaken with expectation of creating debtor-creditor relationship between party sanctioned and state, where said expenses are paid out of state’s regular expenditures.

Dist. Ct. did not err in granting defendant-debt collector’s motion for summary judgment as to one plaintiff’s claim, alleging that defendant violated Fair Debt Collection Practices Act, where defendant failed to report plaintiff’s dispute over debt to credit reporting agency. While plaintiff had standing to bring such claim, where plaintiff suffered intangible, reputation injury that was sufficiently concrete for purposes of Article III standing, Dist. Ct. could properly find that defendant was entitled to bona fide error affirmative defense, where error was caused by clerk sending plaintiff’s dispute letter to wrong department (which prevented dispute letter being sent to credit reporting agency), and where defendant otherwise had procedures to avoid such mistake. Dist. Ct. erred, though, in granting second defendant’s motion for summary judgment raising bona fide error affirmative defense, where record showed that: (1) failure to report plaintiff’s dispute to credit reporting agency was caused by defendant’s failure to check fax inbox for said dispute; (2) plaintiff sent fax containing dispute to fax number provided by defendant; and (3) defendant failed to inform public that it stopped checking fax inbox, yet sent plaintiff confirmation that it had received plaintiff’s fax.

Dist. Ct. did not err in dismissing for failure to state cause of action plaintiff’s claim that defendant breached mortgage agreement and violated Illinois Consumer Fraud and Deceptive Business Practices Act (Act) by charging plaintiff $20 for visual, drive-by inspection of her residence, after plaintiff had defaulted on her mortgage loan. While plaintiff asserted that said fee was improper under mortgage contract because defendant knew or should have known that she already had occupied her property that was subject of said mortgage, and that said fee had violated HUD regulations, plaintiff failed to allege that parties intended to incorporate HUD regulations into mortgage agreement. Moreover, mortgage agreement expressly allowed lender to charge inspection fee as necessary expenditure to protect value of property after plaintiff’s default. With respect to plaintiff’s claim under Act, plaintiff failed to allege that inspection fee offended public policy, was oppressive or caused her substantial injury.

Dist. Ct. did not err in granting defendant-creditor’s motion for summary judgment in plaintiff-debtor action, alleging that defendant violated Fair Credit Reporting Act (FCRA) by initiating collection efforts on debt by acquiring type of credit information called plaintiff’s “propensity-to-pay,” under circumstances where plaintiff had previously received discharge of debt under bankruptcy. Ct. of Appeals initially found that plaintiff had standing to bring instant lawsuit, where allegations in her complaint resembled harm associated with intrusion upon seclusion that related to allegations of invasion of privacy. However, plaintiff failed to prevail on merits of her negligence claim under FCRA, where plaintiff failed to proffer evidence showing that defendant’s actions caused her to incur either pecuniary or non-pecuniary harm, since: (1) plaintiff disavowed any loss of credit, housing, employment, money or insurance that arose out of defendant’s actions; and (2) plaintiff could provide only conclusory statements that defendant’s conduct caused her stress and anger. Moreover, with respect to plaintiff’s claim that defendant willfully violated section 1681b(a)(3)(A) by procuring “consumer report” when underlying debt had been discharged, plaintiff could not establish said violation, since: (1) defendant lacked actual knowledge of plaintiff’s prior bankruptcy at time defendant had obtained plaintiff’s propensity-to-pay score; and (2) defendant could reasonably have relied on its own procedures to obtain bankruptcy information about plaintiff’s debt.

Dist. Ct. did not err in finding that plaintiff made commercially reasonable efforts to remove or release its lien that it had on defendant’s property, where defendant needed to refinance said property to meet its indebtedness to plaintiff at issue in forbearance agreement on different loan to which defendant had defaulted. While plaintiff never released said lien, record showed that Dist. Ct. had properly considered circumstances surrounding parties’ actions, especially where plaintiff had emailed defendant to seek assurance that any proceeds from refinancing of property that was subject of lien would be applied to required payment under forbearance agreement, and defendant had failed to provide sufficient proof that it was working on said necessary refinancing. As such, it was reasonable for plaintiff to request such assurance of refinancing before removing said lien. Moreover, there was nothing in forbearance agreement that imposed unqualified obligation for plaintiff to remove said lien. Dist. Ct. also did not err in confirming judicial sale of property at issue in forbearance agreement, where Dist. Ct. could properly find that plaintiff did not breach forbearance agreement.