Reaging Violation Asserted Against CRA:Waggoner

[David A. Szwak]

Not Reported in F.Supp.2d, 2003 WL 22220668 (N.D.Tex.)United States District Court,
N.D. Texas, Dallas Division.
Marla B. WAGGONER, Plaintiff,
v.
TRANS UNION, LLC, Defendant.
No. Civ.A. 302CV1494G.
July 17, 2003.

MEMORANDUM ORDER

FISH, Chief J.
*1 Before the court is the motion of the defendant Trans Union, LLC ("Trans Union") for summary judgment. For the following reasons, the motion is granted as to the plaintiff's claims under federal law, while her claims under state law are dismissed without prejudice.

I. BACKGROUND
Plaintiff Marla B. Waggoner ("Waggoner") is a citizen and resident of Texas. Plaintiffs' Original Complaint ("Complaint") ¶ 1.01.
First Stone Credit Counseling ("First Stone") is a Texas nonprofit corporation. [FN1] Id. ¶ 1.02.


FN1. On June 20, 2003, this court dismissed First Stone's claim against Trans Union, which is governed exclusively by state law, without prejudice to First Stone's refiling it in state court.


Trans Union, a Delaware limited liability company with offices in Irving, Texas, is a consumer reporting agency. Id. ¶¶ 1.03, 2.04. Trans Union provides consumer credit reports to third party subscribers. Id. ¶ 2.05.
In 1994, Waggoner defaulted on a Citifinancial installment loan account with a balance of approximately $3,500. Id. ¶ 4.01. Waggoner made the last payment on that account during December 1994. Id.
Citifinancial reported to Trans Union that Waggoner opened Citifinancial account number 6074383624315747 in June 1994, and that the account became delinquent beginning in March 1995. Declaration of William R. Stockdale of Trans Union ("Stockdale Declaration") ¶ 14, located in Confidential Documents in Support of Trans Union's Motion for Summary Judgment on Plaintiff Marla Waggoner's Claims Filed Under Seal Pursuant to the Agreed Protective Order Signed by Chief Judge A. Joe Fish on January 21, 2003 ("Trans Union Appendix"), as Exhibit 20. Citifinancial further reported that by July 1995, the account was 120 days overdue with a balance of $4,081. Id.
On June 13, 1995, Waggoner filed bankruptcy under Chapter 7 of the United States Bankruptcy Code and was granted a discharge with respect to the Citifinancial loan installment account. Complaint ¶ 4.02.
Citifinancial alerted Trans Union that in August 1995 Citifinancial account number 6074395424352433, opened in June 1994, had been charged off as a bad debt with a balance of $3,441. Stockdale Declaration ¶ 15.
In May 1998, Waggoner's husband purchased a 1999 Ford pickup truck. Plaintiff Marla Waggoner's Answers and Objections to Defendant Trans Union, LLC's First Set of Interrogatories to Marla B. Waggoner ("Waggoner Interrogatories") at 9, located in Trans Union Appendix, as Exhibit 2. The Waggoners borrowed $33,000 at a rate of 11% to finance the truck. Id. Waggoner has presented no evidence that the financing company received a credit report from Trans Union when it set the interest rate. Videotaped Oral Deposition of Marla B. Waggoner ("Waggoner Deposition") at 284, located in Trans Union Appendix, as Exhibit 1.
In June 1998, Waggoner and her husband purchased a camping trailer for approximately $17,000. Waggoner Interrogatories at 9. Due to a derogatory credit rating, the Waggoners failed to qualify for a zero percent down and zero percent interest promotion. Id. at 9-10. As a result, Waggoner withdrew funds from a high interest bearing account and was penalized for early withdrawal in order to purchase the camper. Id. at 10.
*2 In April 2000, Waggoner took a second mortgage on her home. Id. at 10. Waggoner needed a home equity loan of $18,000, but Citifinancial only loaned her $10,000. Id.
On August 9, 2000, Waggoner hired First Stone to contact credit bureaus and to restore her credit rating. Complaint ¶ 4.06.
Waggoner and her husband subsequently sought to borrow $10,000 from various sources to secure a land contract. Waggoner Deposition at 79. In a letter dated August 12, 2000 to Waggoner and to her husband, Conseco Finance Servicing Corporation denied the couple's loan application based on information that it received from Experian. See Letter from Conseco Finance Servicing Corporation to David D. Waggoner and Marla B. Waggoner dated August 12, 2000, located in Trans Union Appendix, as Exhibit 5. In a letter to the Waggoners dated August 21, 2000, Key Bank denied another loan application based on information that Key Bank received from Equifax. See Letter from Key Bank to David D. Waggoner and Marla B. Waggoner dated August 21, 2000, located in Trans Union Appendix, as Exhibit 4. In a letter dated August 22, 2000, Bank of America denied the Waggoners' loan application based in whole or in part on credit information it received from Experian. See Letter from Bank of America to David D. Waggoner and Marla W. [sic] Waggoner dated August 22, 2000, located in Trans Union Appendix, as Exhibit 3. Unable to borrow the money from a bank, Waggoner withdrew $10,000 from her 401(k) plan in September 2000. Waggoner Deposition at 79-80, 86.
On August 22, 2000, Trans Union printed a consumer credit report for Waggoner. Complaint ¶ 4.04. That report contained various accounts which Trans Union classified as "adverse." Id. The Citifinancial loan installment account twice was reported as an adverse account under different account numbers. Id. ¶ 4.05.
During the summer of 2000 and spring of 2001, Lowe's Home Improvement denied Waggoner a credit card. Waggoner Interrogatories at 10.
In a document addressed to Trans Union dated December 19, 2000, First Stone disputed Waggoner's credit report. Credit Report Dispute dated December 19, 2000, located in Trans Union Appendix, as Exhibit 7. The document contained the following paragraph regarding the Citifinancial account.

CITIFINANCIA 6074395424352433
CITIFINANCIA 6074383624315747

*Incorrect Status* Above listed accounts are the same account. One was transferred to the other and subsequently transferred to Commercial Credit which was included in and discharged through chapter 7 bankruptcy. Please list this as a bankruptcy account only or DELETE BOTH TRADELINES ENTIRELY.
Id. at 3 (emphasis in original).
In response, on December 28, 2000, Trans Union sent consumer dispute verifications to Citifinancial regarding Citifinancial account number 6074395424352433 and Citifinancial account number 6074383624315747. Trans Union's Brief in Support of its Motion for Summary Judgment on Plaintiff Marla Waggoner's Claims ("Motion") at 6; Declaration of Eileen Little of Trans Union LLC ("Little Declaration") ¶ 4, located in Trans Union Appendix, as Exhibit 6.
*3 On January 5, 2001, Citifinancial responded to Trans Union. Trans Union Motion at 6; Little Declaration ¶ 5. Citifinancial reported that Citifinancial account number 6074395424352433 was included in Chapter 7 bankruptcy and that Citifinancial had written off the account in August 1995. Id.; see also Consumer Dispute Verification dated January 5, 2001, located in Trans Union Appendix, as Exhibit 9. Trans Union updated this account on Waggoner's credit file. Little Declaration ¶ 5. Citifinancial, however, did not respond to Trans Union's consumer dispute verification regarding Citifinancial account number 6074383624315747 within the thirty day period required by law. Motion at 6; Little Declaration ¶ 6. In accordance with Trans Union policies, Trans Union removed Citifinancial account number 6074383624315747 from Waggoner's credit file. Id.
On January 24, 2001, Trans Union sent Waggoner an updated copy of her credit report. Motion at 6; Little Declaration ¶ 7. This report reflected updated information regarding Citifinancial account number 6074395424352433 and noted that Citifinancial account number 6074383624315747 had been removed. Id.; see also Credit Report dated January 24, 2001, located in Trans Union Appendix, as Exhibit 11.
In a document dated May 22, 2002, First Stone alerted Trans Union that the Citifinancial account number 6074395424352433 listed on Waggoner's credit report was over seven years old and should be deleted. Motion at 6; Credit Report Dispute dated May 22, 2002 ("May 22, 2002 Dispute"), located in Trans Union Appendix, as Exhibit 12. Specifically, the document contained the following paragraph.

CITIFINANCIAL 6074395424352433

*Incorrect Status* This account is over seven (7) years old. The date of last activity on this account was in 1994 not 1995 as you are reporting. PLEASE DELETE.
May 22, 2002 Dispute at 2.
In a letter to Waggoner dated May 30, 2002, Trans Union stated, in pertinent part,
Our experience with [First Stone] shows that they routinely and knowingly dispute accurate information. We believe this practice violates the Federal Credit Repair Organization Act. For this reason, we consider their dispute to be frivolous and we will not take action on it.
Complaint ¶ 4.11; see also Letter from Trans Union to Waggoner dated May 30, 2002, located in Trans Union Appendix, as Exhibit 13.
On May 30, 2002, Trans Union also sent Waggoner an updated copy of her credit report. Little Declaration ¶ 8; see also Credit Report dated May 30, 2002, located in Trans Union Appendix, as Exhibit 14. Neither First Stone nor Waggoner communicated to Trans Union any disagreement with that report. Little Declaration ¶ 9. Waggoner does not dispute that by May 30, 2002, the only account bearing adverse information on her credit report was Citifinancial account number 6074395424352433. Complaint ¶ 4.10. Waggoner maintains that this account was discharged in bankruptcy and also is barred by limitations. Id.
*4 On June 12, 2001, Waggoner and her husband borrowed $48,000 at 9.75% from First Texoma Bank. See Promissory Note, located in Trans Union Appendix, as Exhibit 17. Waggoner can provide no evidence that First Texoma Bank requested Waggoner's credit report from Trans Union. Waggoner Deposition at 109-11.
During March 2002, Waggoner borrowed $55,000 from First Texoma Bank for a construction loan. Id. at 111. First Texoma Bank rolled this loan into the $48,000 loan. Id. at 111-13. This resulted in $101,584.56 note with a rate of 7.5%. See Consumer Promissory Note, located in Trans Union Appendix, as Exhibit 18. Before she received the construction loan from First Texoma Bank, Waggoner applied to Bank of America for a construction loan. Waggoner Deposition at 116. She believes that she was denied the loan due to a credit report that Bank of America received from Trans Union. Id. at 116-17. However, Waggoner has no proof that Trans Union issued a credit report to Bank of America at the time that she applied for the construction loan. Id. at 117, 140.
During June 2002, Sam's Wholesale Club ("Sam's Club") denied Waggoner a promotional opportunity for deferred monthly payments on a Sam's Club credit card. Waggoner Interrogatories at 10. Waggoner maintains that this occurred "while in line with [her] son and a line of people who heard. It was very embarrassing." Waggoner Interrogatories at 121.
Wagoner filed this case on July 15, 2002. In it, she maintains that as a result of her "false and defamatory credit report," she has been unable to obtain a mortgage loan at market rates, despite her substantial income. Complaint ¶ 4.15. Waggoner avers that Trans Union has violated various sections of the Fair Credit Reporting Act ("FCRA"), § 1681, et seq. Specifically, Waggoner asserts that Trans Union failed to follow procedures to ensure the accuracy of Waggoner's credit report, failed to update information in Waggoner's credit report, and maintained obsolete information on Waggoner's report. See generally Complaint.
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2. Violation of FCRA § 1681c(a)
Waggoner contends that retention of Citifinancial account number 6074395424352433 on her credit report for more than seven years violates FCRA § 1681c(a)(4) and (6). Complaint ¶ 7.03. Waggoner maintains that because the last payment she made on Citifinancial account number 6074395424352433 was in December 1994, the seven year limitations period for reporting that account would have expired during December 2001. Id. ¶ 4.01; see also id. ¶ 7.02; Motion at 7. Trans Union, on the other hand, asserts that the seven year period runs from the date in August 1995 on which the account was written off to profit and loss. Motion at 13.
Trans Union asserts that the FCRA allows for profit and loss writeoffs that were submitted to consumer reporting agencies prior to December 29, 1997 to be reported for seven years from the date of the profit and loss writeoff. Id. at 7. [FN3] Since October 1995, Citifinancial has reported to Trans Union that Citifinancial account number 6074395424352433 was charged to profit and loss in August 1995. Id. This information was verified by Citifinancial in January 2001 in response to Trans Union's December 2000 credit verification request. Id. Thus, Trans Union argues, it could report adverse information regarding Citifinancial account number 6074395424352433 for seven years in accordance with FCRA § 1681c(c)(2). Id. Trans Union reports adverse information for 6 years and 11 months, not seven years as allowed by FCRA. Stockdale Declaration ¶ 18. Under this system, Trans Union automatically removed Citifinancial account number 6074395424352433 from Waggoner's credit report on July 1, 2002. Id. ¶ 19.


FN3. As previously noted, Waggoner maintains that the last payment that she made on Citifinancial account number 6074395424352433 was in December 1994, so that the seven year limitation period for reporting this account would have run during December 2001. Complaint ¶ 4.01. Thus, Waggoner's attempts to acquire a loan during August 2000 and to obtain a Lowe's Home Improvement credit card during the summer of 2000 and the spring of 2001 would have occurred during the portion of the seven year limitations period upon which the parties agree.


FCRA § 1681c prohibits a credit reporting agency from disclosing adverse accounts "placed for collection or charged to profit and loss which antedate the report by more than seven years." FCRA § 1681c(a)(4). Congress clarified the FCRA reporting limits by adding a new subsection (c) to § 1681c. See Omnibus Consolidated Appropriations Act, Pub.L. 104-208, § 2406(b), 110 Stat. 3009 (1996).
*8 Under the FCRA, as amended on September 30, 1996, the seven year statute of limitations runs as follows:
(c) Running of reporting period
(1) In general.--The 7-year period referred to in paragraphs (4) and (6) of subsection (a) of this section shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.
(2) Effective date.--Paragraph (1) shall apply on to items of information added to the file of a consumer on or after the date that is 455 days after Sept. 30, 1996.
FCRA § 1681c (emphasis added). Congress intended the more specific FCRA reporting requirements "to apply only to information furnished to a consumer reporting agency more than 455 days after enactment of the Consumer Reporting Reform Act. Information reported to the consumer reporting agency prior to that date will be unaffected." S. REP. NO. 104-185, 104th Cong., 1st Sess., at 40 (1995) (emphasis added).
The parties do not dispute that Citifinancial charged off Citifinancial account number 6074395424352433 to profit and loss in August 1995. This occurred before amendment of the FCRA. Under the FCRA, therefore, the applicable seven year period began to run in August 1995 and ended in August 2002. Accordingly, Trans Union did not, as a matter of law, report obsolete information regarding Citifinancial account number 6074395424352433. The retention of Citifinancial account number 6074395424352433 on Waggoner's credit report during her application for a construction loan during March 2002 and a Sam's Club card during June 2002 was reasonable. [FN4] Moreover, Waggoner has presented no evidence that Trans Union published her credit report in conjunction with either transaction. Accordingly, Waggoner has failed to demonstrate that Trans Union violated FCRA § 1681c(a).


FN4. Waggoner asserted FCRA claims for denial of a Sears credit card on several occasions from August 2002 through October 2002. Waggoner Interrogatories at 11. She also seeks damages for a higher interest rate she paid on mortgage application in November 2002. Waggoner Deposition at 123-24, 133-34. These incidents occurred after Trans Union removed Citifinancial account number 6074395424352433 from Waggoner's credit report in July 2002.