[FCRA] Creditors Walk a Fine Line When Communicating With a Debtor During and After Bankruptcy


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Kelly v. Quicken Loans Inc., 2020 U.S. Dist. LEXIS 68570 (N.D. Tex. Apr. 18, 2020), highlights the difficulties a creditor faces when a debtor files for bankruptcy.  In that case, even though the creditor’s communications acknowledged the plaintiff’s bankruptcy and contained disclaimer language, a district court largely rejected defendant’s motion to dismiss plaintiff’s FCRA and state-law claims.    

As an initial matter, defendant only moved to dismiss plaintiff’s FCRA claim to the extent that it was based on allegations that defendant was trying to collect a discharged debt.  However, because the court concluded that the FCRA claim was based on allegedly impermissible account reviews and credit pulls and not on attempting to collect a discharged debt, it summarily denied defendant’s motion to dismiss the FCRA claim.

As to plaintiff’s Texas Debt Collection Act claims, defendant moved to dismiss the claims insofar as they were also based on plaintiff’s allegation that defendant was attempting to collect a discharged debt.  Specifically, defendant pointed to language in the communications demonstrating that defendant was not attempting to a collect a debt.  While the court acknowledged the disclaimer language in the communications, relying on two decisions analyzing claims for violations of post-discharge injunctions, it found that plaintiff’s allegations were sufficient to allege violations of various sections of the Act.  Specifically, as to one communication, the court noted that the disclaimer language “appears in font smaller than the bolded font listing the payment amount and payment due date.” As to another, it described the disclaimer as “small and inconspicuous.”  The court, however, agreed with defendant that plaintiff’s general allegations of emotional distress and mental anguish were not sufficient to allege that defendant violated the Act by making a false or misleading statement that led her to think differently with respect to the character, extent, amount of, or status of her debt.  It then dismissed the claim without prejudice, permitting plaintiff to amend over defendant’s objection.

For the reasons discussed above, the court also denied defendant’s motion to dismiss plaintiff’s invasion-of-privacy claim, although the court expressed skepticism as to whether defendant’s communications rise to the level of being “highly offensive” or intentionally intrusive into plaintiff’s private affair.  Finally, the court relied on one communication, which had a conspicuous statement that it was an attempt to collect a debt, to deny defendant’s motion to dismiss plaintiff’s claim that defendant had violated the automatic stay.  While the court acknowledged that there was no demand in the letter for plaintiff to pay the debt, it found that it could not ignore the statement that the letter was an attempt to collect a debt – at least at the motion to dismiss stage.

As the Kelly case makes clear, when communicating with a debtor during and after a bankruptcy, a creditor must be careful to ensure that it is complying with both the spirit and letter of all federal and state laws governing such communications.

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