I know it’s a real property case, but the argument is something that we’ve seen a bit of in California on the personal property side. In Groff v. Wells Fargo Home Mortg., Inc., 2015 WL 2169811 (E.D. Mich. 2015), Judge Lawson found that the defendant did not violate the Fair Credit Reporting Act when it reported that the plaintiff’s bankruptcy-discharged home mortgage loan had a zero balance and no payment activity.
The plaintiff contends in this case that the defendant’s zero balance/zero payment report was inaccurate. The FCRA does not define the terms “accurate” or “complete,” but the Federal Trade Commission has promulgated a regulation that defines the term “accuracy” for consumer credit reporting: Accuracy means that information that a furnisher provides to a consumer reporting agency about an account or other relationship with the consumer correctly: (1) Reflects the terms of and liability for the account or other relationship; (2) Reflects the consumer’s performance and other conduct with respect to the account or other relationship; and (3) Identifies the appropriate consumer. 12 C.F.R. § 41.41(a). The Sixth Circuit has observed that “false information about a consumer is clearly inaccurate, and so failing to report the discovery of false consumer information to all CRAs would violate [section] 1681s–2(b)(1)(D)”; and “[section] 1681s–2(b)(1)(D) [also] is violated if a report of an investigation, although it contains correct information, nevertheless ‘provides information in such a manner as to create a materially misleading impression.’ “ Boggio, 696 F.3d at 617. “The duty [to correct an incomplete or inaccurate report] equally extends to the discovery of both inaccurate or incomplete consumer information and to the discovery of consumer information that is materially misleading.” Id. at 618. Only two federal courts have addressed the question whether a bank violates section 1681s–2 by reporting a borrower’s mortgage loan account that was discharged in bankruptcy as closed, with no balance, and no payments made after the date of discharge. Both held that it does not. As the Tenth Circuit explained in Schueller v. Wells Fargo & Co., 559 F. App’x 733 (2014), a note and mortgage creates a personal obligation by the note obligee and a lien on property. A discharge in bankruptcy extinguishes the debtor’s personal liability for the debt, but leaves “intact” the remedy against the property, which the court characterized as “an action against the debtor in rem.” Id. at 737 (citing Johnson v. Home State Bank, 501 U.S. 78, 84, 111 S.Ct. 2150, 115 L.Ed.2d 66 (2008)). The court observed that the plaintiff did “not carr[y] his burden of showing that the information Wells Fargo furnished was inaccurate[,] incomplete, … [or] materially misleading” when the bank reported that the plaintiff’s account was closed, the balance was zero, and no payments were made, because the bankruptcy extinguished the plaintiff’s personal obligation on the note. Ibid. The court found that the report was accurate, and it found “no authority requiring [the bank] to report [the plaintiff’s] post-bankruptcy mortgage payments.” Ibid. ¶ Similarly, in Horsch v. Wells Fargo Home Mortage, No. 14–2638, –––F.Supp.3d ––––, 2015 WL 1344836 (E.D.Pa. Mar.25, 2015), the district court held that “[r]eporting a ‘zero balance’ [was] accurate and complete” where it was undisputed that the plaintiff’s personal obligation to repay the note was discharged in bankruptcy, even though he continued to make voluntary payments to prevent foreclosure on the home. 2015 WL 1344836, at *6. . . . ¶ The plaintiff points to 12 C.F.R. § 41.41(a), which requires accurate reports “about an account or other relationship with the consumer,” and insists that the continuing mortgage payments amount to that “other relationship.” But there is no support for the idea that the consumer—here, the debtor—maintained a “relationship” with the bank by voluntarily paying a debt he did not reaffirm. Rather, there was no “incomplete” or “materially misleading” reporting where the bank indicated only that the loan was closed with no balance, without including any information about payments voluntarily made by the plaintiff after his discharge. As the Schueller court noted, a bankruptcy discharge extinguishes a debtor’s personal obligation for the home mortgage loan, if not the mortgage lien against the property. And as the Horsch court observed, a person’s credit report is a summary of his or her past and present personal debts and performance in paying them, not a catalog of the economic status of any security interests that might be held by the person’s lenders in various items of property owned by the debtor.The plaintiff contends that there is a genuine issue of material fact about “the nature of the relationship” between the Groffs and their lender after the discharge, because the bank continued sending them “informational” statements regarding the mortgage loan, and the Groffs continued making payments, to stave off a foreclosure. The plaintiff suggests that, because the bank continued to accept payments and credit them toward a “declining loan balance,” there is a question of fact whether any new relationship arose between them after the bankruptcy discharge, which was “inaccurately” or “incompletely” reflected in the bank’s reporting of “no information” on the loan account trade line. But there is no question about the status of the parties’ relationship as creditor and debtor after the bankruptcy discharge: there was none. The fact that the bank accepted the Groffs’ voluntary payments and refrained from foreclosing on their home to satisfy its remaining security interest does not establish that any relationship at all existed between the parties other than as a property owner and a lien holder, each having valid and potentially adverse claims to possession of the plaintiff’s home, based upon their recorded interests in the property. The fact that the bank continued to inform the Groffs of the declining value of its unsatisfied security interest in the home as a result of their payments made does not establish, or even suggest, that any new debtor-creditor relationship—or any similar relationship—arose between them. The plaintiffs do not deny that they could have stopped making payments at any time, and the bank would have had no recourse against them personally. Moreover, as the Horsch court observed, any report of payments voluntarily made by the Groffs as relating to the discharged mortgage loan would suggest to anyone viewing the plaintiff’s credit report that the bank was engaged in exactly the conduct prohibited by the bankruptcy discharge—collecting or attempting to collect money from Groff to satisfy a previously discharged debt. That reporting would itself have been inaccurate and false, because it would not accurately and completely reflect the truth that the plaintiff’s debt had been extinguished.