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Nelson v. Ocwen Loan Servicing, LLC

United States District Court, D. Oregon

June 23, 2014


Lawrence B. Hunt, Kevin J. Tillson, Hunt & Associates, PC, Portland, OR, Attorneys for Plaintiff.

Nicholas J. Henderson, Motschenbacher & Blattner, LLP, Portland, OR, William M. Huse, Schuckit & Associates, P.C., Zionsville, IN, Attorneys for Defendant Trans Union, LLC.


MARCO A. HERNNDEZ, District Judge.

Plaintiff Russell Nelson brings this action against Ocwen Lending Services, LLC ("Ocwen"), and the three major consumer credit reporting agencies ("CRA"), Equifax, Experian, and Trans Union, for violations of the Fair Credit Reporting Act ("FCRA"). Defendant Trans Union moves to dismiss for failure to state a claim upon which relief can be granted. (#10). The motion is denied.


Nelson's claims against Ocwen and the three CRAs arose out of a 2008 loan Nelson secured for a duplex in Portland, Oregon. Complaint ("Compl.") ¶¶ 4-10. Nelson sold the property on April 8, 2013 and remitted to the note holder, Ocwen, the full payoff amount of $217, 491.76. Compl. ¶ 15. Ocwen claimed, however, that Nelson owed a prepayment penalty of $5, 134.96, despite an addendum to the note explicitly waiving such a penalty if Nelson provided notice and documentation to the holder that he was paying the amount in full after selling the property to an unrelated third party. Compl. ¶¶ 16-17; Plaintiff's Exhibit ("Pl. Ex.") 2. Nelson insisted that prior to closing, he sent Ocwen the proper notice of the sale and documentation that the purchaser was an unrelated third party. Compl. ¶ 13.

Nelson and Ocwen battled for months about the penalty. Compl. ¶¶ 16-26, 36. In April and again in September of 2013, the escrow officer responsible for the closing wrote to Ocwen explaining that the sale fully satisfied the loan and complied with Ocwen's instructions for waiving the prepayment penalty. Compl. ¶¶ 19, 24; Pl. Ex. 6, 11. Still, Ocwen insisted Nelson owed a penalty, and sometime before October, 2013, Ocwen reported the outstanding prepayment penalty as an adverse item to the three major CRAs. Compl. ¶ 27. Later in October, Nelson received written notices from several personal credit card companies that his credit lines were being reduced because of Ocwen's negative credit report. Id . On or about November 6, 2013, Multnomah County recorded a Deed of Reconveyance acknowledging Nelson had paid the entire amount due on the promissory note and releasing Ocwen's Trust Deed on the property. Compl. ¶ 36.

Nelson filed disputes about the Ocwen debt with the CRAs on December 16, 2013. Compl. ¶¶ 28-32. Nelson claims the CRAs failed to conduct an adequate investigation into the dispute, failed to review the loan documents and other information he submitted, and failed to delete the adverse item after the CRAs could not verify its accuracy. Compl. ¶¶ 45-59. Nelson then filed this suit and accused the CRAs of violating Sections 1681e(b) and 1681 i of FCRA, which require CRAs follow reasonable procedures to assure maximum accuracy of consumer credit reports, and conduct a reasonable reinvestigation into disputed debts. 15 U.S.C §§ 1681e(b) and 1681 i (2014); Compl. ¶¶ 45-59. Nelson also brought FCRA claims against Ocwen as a furnisher of credit information for failing to conduct a reasonable investigation after receiving notice of his dispute from the CRAs. 15 U.S.C. § 1681s-2(b); Compl. ¶¶ 37-41.

Defendant Trans Union now moves to dismiss Nelson's complaint for failure to state a claim because, it argues, a CRA is not required under FCRA to address the merits of a purely legal dispute between a creditor and consumer. Defendant's Motion ("Def. Mtn.") at 3.


A motion to dismiss under Federal Rule of Civil Procedure ("Rule") 12(b)(6) asks the court to test the sufficiency of the plaintiff's claims. Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). Allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Am. Family Ass'n, Inc. v. City & Cnty. of S.F. , 277 F.3d 1114, 1120 (9th Cir. 2002). The court is not, however, required to assume the truth of mere conclusory allegations. Warren v. Fox Family Worldwide, Inc. , 328 F.3d 1136, 1139 (9th Cir. 2003). A complaint that alleges grounds for relief based on nothing "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action" will be dismissed. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007).

To survive a motion to dismiss, the complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face, " meaning the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Aschcroft v. Iqbal , 556 U.S. 662, 678 (2009) (internal quotation marks omitted). The complaint must state well-pleaded facts that "permit the court to infer more than a mere possibility of misconduct...." Id . at 679. See also Twombly , 550 U.S. at 555 ("Factual allegations must be enough to raise a right to relief above the speculative legal... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)") (citations omitted).


Nelson alleges Trans Union negligently and recklessly failed to comply with its duties under FCRA by (1) failing to follow reasonable procedures to assure maximum possible accuracy of the information on his credit report, and (2) failing to comply with FCRA's reinvestigation provision. 15 U.S.C. §§ 1681e(b), 1681 i (2014); Compl. at ¶¶ 55-57. Both claims require a prima facie showing that the consumer's credit report contained inaccurate information. Bradshaw v. BAC Home Loans Servicing LP , 816 F.Supp.2d 1066, 1071, 1073 (D. Or. 2011) (citations omitted). An item on a credit report is considered inaccurate under FCRA if it is "patently incorrect, or because it is misleading ...

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