Favors v. Synchrony Bank

Background

Joseph Anthony Favors, representing himself, sued Synchrony Bank over an unsecured credit-card account. Favors alleged that he was charged $108.64 for an item that was immediately returned, sent Synchrony dispute letters, and then received statements retaining the charge and adding $41 late fees. He also alleged that Synchrony reduced his credit limit from $3,400 to $250 and later closed the account. Synchrony moved to dismiss the Second Amended Complaint under Rule 12(b)(6), which asks whether the complaint states a legally sufficient claim.

Equal Credit Opportunity Act

The court denied Synchrony’s motion to dismiss Favors’s claim under the Equal Credit Opportunity Act. Favors alleged that he disputed the charge in good faith and that Synchrony responded by reducing his credit limit and closing his account. The court held that these allegations plausibly described retaliation for exercising a right under the Consumer Credit Protection Act and receiving credit on less favorable terms. Synchrony’s asserted legal reason for its actions did not defeat the claim at the pleading stage.

Fair Credit Reporting Act

The court granted the motion to dismiss Favors’s Fair Credit Reporting Act claim. As to the provision requiring notice of adverse action, Favors’s own allegations showed that Synchrony sent him a letter disclosing the adverse action. As to the provision requiring a furnisher to investigate disputed information, the complaint did not allege that a credit-reporting agency notified Synchrony of a dispute, that Favors disputed the information with such an agency, or that Synchrony failed to conduct a legally adequate investigation.

Other federal and constitutional claims

The court granted dismissal of Favors’s claim under 42 U.S.C. § 1981 because he did not allege that he belonged to a protected class. It dismissed the Truth in Lending Act claim because the complaint provided no supporting allegations. It also granted dismissal of the Fair Credit Billing Act claim because the complaint did not provide enough dates to show that Favors’s dispute was timely, and because Favors alleged that Synchrony acknowledged the dispute and provided a written explanation.

The court granted dismissal of Favors’s claim under 42 U.S.C. § 1983, which requires action by a government actor or someone acting under state authority. Favors alleged no facts showing that Synchrony was a government actor or acted under color of state law.

State-law claims

The court granted dismissal of the unconscionable-contract claim. Favors appeared to challenge the cardholder agreement based on the $41 late fees, but he did not provide facts showing that the fees were excessive or abnormal compared with similar agreements.

The court denied dismissal of the unjust-enrichment claim to the extent it concerned the $108 charge and related late fees. Favors plausibly alleged that the charge resulted from a returned product, that the amount should have been refunded, and that Synchrony was not entitled to the late fees if the charge was a billing error. The court rejected, however, Favors’s separate theory that Synchrony was unjustly enriched merely by reducing his credit limit, because reducing a credit limit did not provide Synchrony with something of value. The unjust-enrichment claim was pleaded in the alternative because it may be unavailable if a valid contract governs the parties’ rights.

The court also granted dismissal of Favors’s claim under Minnesota Statute § 609.748 because he did not comply with statutory requirements, including filing an affidavit stating the specific facts and circumstances supporting the requested relief.

Disposition

Judge John R. Tunheim ordered that Synchrony’s motion to dismiss be granted in part and denied in part. The motion was denied as to the Equal Credit Opportunity Act claim and the unjust-enrichment claim based on the $108 charge and subsequent late fees. It was granted as to the remaining claims, which the court dismissed without prejudice. The order did not decide whether the surviving claims would ultimately succeed.