Hamal v. Seterus, Inc.
1:16-cv-10159
N.D. Ill.Jul 12, 2017Background
- In 2010 the Hamals obtained a mortgage on 4111 West Lake Avenue, Glenview, IL; two mortgage accounts existed and a 2014 payment was applied to the wrong account, producing an apparent delinquency.
- Bank of America serviced the loans until September 30, 2014, when servicing transferred to Seterus; the account showed delinquency when Seterus took over.
- The Hamals (through counsel after October 31, 2014) and Bank of America disputed and notified Seterus of the payment/tax errors; a June 23, 2015 fax from Bank of America to Seterus was attached to the complaint.
- Seterus continued to send statements and make collection calls reflecting the delinquency through November 2015; late fees were refunded after the property was sold in December 2015.
- Plaintiffs allege FDCPA violations for direct communications and false representations and an FCRA claim that Seterus reported an inaccurate delinquency to credit agencies.
- Procedural posture: Seterus moved to dismiss under Rule 12(b)(6) and for sanctions. The court dismissed the FDCPA claim without prejudice, dismissed the FCRA claim with prejudice, and denied sanctions; plaintiffs may amend within 21 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the loan is a "debt" under the FDCPA | The mortgage arises from a consumer transaction and is protected by the FDCPA | The complaint fails to plead that the loan was primarily for personal, family, or household purposes; indicia show an investment/commercial purpose | Dismissed Count I without prejudice for failure to plead consumer debt status |
| Whether §1681s-2(a) of the FCRA gives a private right of action | Seterus reported the delinquency with actual knowledge it was erroneous, giving rise to a private claim | §1681s-2(a) does not create a private right of action | Dismissed Count II with prejudice (no private right under §1681s-2(a)) |
| Whether sanctions are appropriate for filing a baseless complaint | Plaintiffs implicitly: claims raised were reasonable to pursue at pleading stage | Seterus: claims are vexatious, legally and factually baseless warranting sanctions | Sanctions denied; court favors permitting amendment and using Rule 12(b)(6) to dismiss inadequate pleadings |
| Whether dismissal should be with or without prejudice | Plaintiffs implicitly: leave to amend should be allowed | Seterus implicitly: claims merit dismissal (and sanctions) | Court allowed leave to amend for FDCPA claim (without prejudice); FCRA claim dismissed with prejudice |
Key Cases Cited
- Miller v. McCalla, Raymer, Padrick, Nichols & Clark, L.L.C., 214 F.3d 872 (7th Cir.) (assessing whether debt is consumer by reference to character when loan originated)
- Newman v. Boehm, Pearlstein & Bright, Ltd., 119 F.3d 477 (7th Cir.) (family-home purchases ordinarily have personal, family, or household purpose)
- Purcell v. Bank of Am., 659 F.3d 622 (7th Cir.) (§1681s-2(a) does not create a private right of action)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S.) (facial plausibility pleading standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S.) (pleading must state a plausible claim)