Thompson v. Navy Federal Credit Union

Background

Kenan Thompson sued Navy Federal Credit Union over a car-loan transaction entered into on July 20, 2022. Thompson represented himself and was proceeding without paying the filing fee. His Third Amended Complaint asserted eight theories: violations of the Truth in Lending Act, the Fair Debt Collection Practices Act, the Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act; a violation of the Federal Trade Commission's Holder Rule, 16 C.F.R. § 433.2; a violation of the Equal Credit Opportunity Act; defamation; and fraud.

Thompson alleged that Navy Federal failed to identify the creditor, explain rescission rights, and include notice of potential claims and defenses. He also alleged that Navy Federal sent collection communications, threatened to report late payments, reported the debt and personal information to credit-reporting agencies, and put the debt back on his credit report without properly investigating it. He sought monetary damages, changes to his credit report, release of the lien on his car, and clear title.

Screening standard

Because Thompson was proceeding without paying the filing fee, the court screened the complaint under 28 U.S.C. § 1915(e)(2)(B), applying standards similar to those used for a motion to dismiss for failure to state a claim. The court had to determine whether the allegations were sufficient to state plausible claims before directing the U.S. Marshal to serve the defendant. The court also was required to read the self-represented complaint liberally. The court emphasized that its assessment was made without briefing from Navy Federal and could be reconsidered after briefing.

Claims the court allowed to proceed to service

The court found the Truth in Lending Act claim viable because Thompson alleged that Navy Federal failed to disclose the creditor and his rescission rights.

Although the Gramm-Leach-Bliley Act does not provide a private right to sue, the court identified a potentially viable privacy claim under California Financial Code § 4052.5 based on the alleged disclosure of nonpublic personal information to unaffiliated third parties.

The court found the Fair Debt Collection Practices Act claim viable because Thompson alleged, among other things, that Navy Federal failed to disclose the creditor. Construing the complaint broadly, the court also found a viable claim under California's Rosenthal Act. The court noted that creditors generally are not covered by the federal Act's definition of “debt collector,” but a creditor can qualify under the Rosenthal Act.

The court found the Fair Credit Reporting Act claim viable because Thompson alleged that Navy Federal failed to conduct an adequate investigation after he disputed the debt. The court also allowed the claim based on 16 C.F.R. § 433.2, known as the Holder Rule, at the screening stage because Thompson alleged that the required notice of potential claims and defenses was missing.

Claims the court found not viable

The court found the Equal Credit Opportunity Act claim not viable. Thompson alleged that Navy Federal threatened to report him to credit-reporting agencies when he requested debt verification, but the court said he had not adequately alleged discrimination based on that request or another protected basis.

The court found the defamation claim not viable because it concerned allegedly false reports to credit-reporting agencies and was preempted by the Fair Credit Reporting Act under the approach the court adopted.

The court also found the fraud claim not viable. Fraud claims must describe the circumstances of the alleged misconduct in detail, including who did what, when, where, and how. The court said Thompson had received multiple opportunities to plead fraud specifically but had alleged only in general terms that he was tricked into the loan. The court also noted that his allegation that he did not know he was entering a loan conflicted with his allegation that he entered into a consumer-credit transaction.

Disposition

The court stated that the defamation, fraud, and Equal Credit Opportunity Act claims were not viable, while the other claims warranted service by the U.S. Marshal. It directed the Marshal to serve Navy Federal with the complaint, the order, and the full docket, and stated that the order resolved ECF No. 22. The court did not describe the ruling as a final decision on the merits and said it could reconsider its conclusions after briefing by Navy Federal.