Hrebal v. Nationstar Mortgage LLC

Background

Charles Hrebal brought a claim under the Fair Credit Reporting Act (FCRA), a federal law governing consumer credit reporting. Nationstar Mortgage LLC, doing business as Mr. Cooper and identified in the order as Seterus’s successor, had reported Hrebal’s mortgage delinquency. Hrebal disputed the reporting, including in light of his Chapter 13 bankruptcy discharge.

The court stated that Mr. Cooper received at least three official dispute notifications through credit reporting agencies. The court found that Mr. Cooper did not review older servicing records that could have revealed the source of Hrebal’s dispute, did not refer the dispute to its specialized bankruptcy department, and confirmed the delinquency three times after only a cursory review of recent payment records. The reporting created the impression that Hrebal had fallen behind on his mortgage immediately after leaving bankruptcy, even though he had not missed a mortgage payment in more than five years.

Motion and ruling

Hrebal asked the court to reconsider its earlier summary-judgment decision. The court granted the motion for reconsideration and entered partial summary judgment for Hrebal under 15 U.S.C. § 1681o. Summary judgment is a decision without a trial when the court finds that no material factual dispute requires a jury’s decision.

The court held that Mr. Cooper negligently violated 15 U.S.C. § 1681s-2(b)(1) by repeatedly failing to report Hrebal’s mortgage delinquency as disputed. Under the court’s analysis, a credit-information furnisher must conduct a reasonable investigation when a consumer disputes reported information. If that investigation would show that the dispute is bona fide, meaning genuine, or potentially meritorious, the furnisher should report the debt as disputed to avoid providing materially misleading credit information.

The court did not decide whether the mortgage arrears were legally enforceable. It addressed the narrower issue of whether Mr. Cooper should have reported the delinquency as disputed. The court concluded that no material factual dispute remained regarding liability. Facts cited by Mr. Cooper, including its alleged efforts to follow bankruptcy procedures and its prior communications about the account, went mainly to whether the violation was reckless or intentional rather than to whether the negligent violation occurred.

Issues left for trial

A jury trial remains necessary to determine what, if any, actual damages Hrebal suffered from the violation. The order states that his actual-damages claim is limited to alleged emotional distress. The jury must also decide whether Mr. Cooper acted willfully or recklessly and, if so, what, if any, punitive damages should be imposed.

Disposition

The court granted Hrebal’s Motion for Reconsideration and entered partial summary judgment in his favor on negligent liability under the FCRA. The court stated that all other pretrial deadlines remained in effect. Judge Susan Richard Nelson signed the order on June 14, 2019.