Kilpakis v. JPMorgan Chase Financial Co.
229 F. Supp. 3d 133
E.D.N.Y2017Background
- Plaintiff Bette Kilpakis alleges identity-theft-related mortgage debt that she did not incur; HSBC filed a foreclosure action and later entered a Stipulation (2015) under which Kilpakis consented to foreclosure but HSBC waived any deficiency and personal liability.
- Wells Fargo (creditor) appears to have acquired the mortgage; America’s Servicing Company (ASC), a Wells Fargo servicing division, reported the mortgage/foreclosure to credit agencies, which appeared on Kilpakis’s Equifax report.
- Kilpakis disputed the credit reporting (Nov 2015 to Equifax; Dec 14, 2015 dispute letter to ASC). ASC investigated, declined to change the substantive reporting, and noted it had completed an FCRA investigation but the plaintiff disagreed.
- Kilpakis alleges ASC violated the FCRA (15 U.S.C. §1681s-2(b)) by reporting materially misleading information, the FDCPA (15 U.S.C. §§1692e, 1692f) by falsely representing debt status and using deceptive collection means, and initially asserted a NY GBL §349 claim (withdrawn).
- ASC moved to dismiss under Rule 12(b)(6); Kilpakis sought leave to file an amended complaint. The court treated the motion as addressed to the proposed amended complaint and denied ASC’s motion, granting leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ASC’s credit reporting violated §1681s-2(b) (accuracy) | Reporting foreclosure/collection without disclosing that HSBC waived deficiency was materially misleading and could adversely affect credit decisions | Technical accuracy suffices; describing the result as "foreclosure" is truthful and no duty to provide contextual explanation | Court: "materially misleading" standard applies; plausible that ASC’s selective reporting was misleading — FCRA claim survives dismissal |
| Whether ASC is a "debt collector" under the FDCPA because it began servicing post-default | ASC began servicing after default, so it qualifies as a debt collector under 15 U.S.C. §1692a(6) | ASC is a loan servicer/agent for creditor (Wells Fargo) and not a debt collector if it obtained the debt before default | Court: Complaint fails to allege when ASC began servicing; plaintiff did not plausibly plead post-default servicing — that theory insufficient as pled |
| Whether Wells Fargo/ASC fall within the FDCPA "false name" exception (creditor using another name to collect) | ASC’s name and communications could lead the least sophisticated consumer to think a third party was collecting; ASC did not disclose it is Wells Fargo — so Wells Fargo acted as a debt collector | ASC is Wells Fargo’s servicer/trade name; no false-name issue because trade name is valid and not misleading | Court: Allegations are sufficient to plausibly show the least sophisticated consumer could think ASC was a third party; FDCPA claim survives dismissal on this ground |
| Motion to amend / futility | Proposed amended complaint does not add new claims but clarifies allegations; should be permitted unless futile | — | Court: Treated motion to dismiss as against proposed amended complaint; denied ASC’s dismissal motion and granted leave to amend (amended complaint due in 5 days) |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading standard: plausible claim required)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: reasonable inference of liability)
- Sepulvado v. CSC Credit Servs., Inc., 158 F.3d 890 (credit report inaccurate if patently incorrect or materially misleading)
- Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876 (adopting materially misleading standard for accuracy)
- Saunders v. Branch Banking & Trust Co. of Va., 526 F.3d 142 (technically accurate reports may still mislead and violate FCRA)
- Koropoulos v. Credit Bureau, Inc., 734 F.2d 37 (FCRA seeks accuracy to the maximum possible extent)
- Alibrandi v. Financial Outsourcing Services, 333 F.3d 82 (definition/exceptions for "debt collector")
- Maguire v. Citicorp Retail Servs., 147 F.3d 232 (false-name exception: whether least sophisticated consumer would be misled)
- Vincent v. Money Store, 736 F.3d 88 (creditor immunity exception where creditor uses another name to collect debts)