In Grantham v. Bank of America, N.A., 2012 WL 5904729 (N.D.Cal. 2012), Judge James held that a Plaintiff stated a claim against a Bank for post-bankruptcy discharge credit reporting.

In February 2011, Grantham sent a dispute letter to Experian requesting an investigation of the 1051 Account, disputing the alleged delinquencies reported in her credit report while her bankruptcy petition was pending.FN1 Id. ¶ 16. On February 28, 2011, Grantham received a credit report from Experian which showed that the delinquencies had been removed. Id. ¶ 17, Ex. C; Pl.’s Opp’n, Ex. A, Dkt. No. 16. The Experian report for the 1051 Account reports that it was “Discharged through Bankruptcy Chapter 7,” and “Debt included in Chapter 7 Bankruptcy.” Compl., Ex. C; Pl.’s Opp’n, Ex. A. It also reports the 1051 Account with a $0 balance as of October 2010. Compl., Ex. C; Pl.’s Opp’n, Ex. A. However, the report indicates that BofA reported the account as 30 days late in November 2010 and reported the account as “charged-off” as of December 2010. Compl., Ex. C; Pl.’s Opp’n, Ex. A.

Judge James found that these facts stated a claim under FCRA and the CCRAA:

Here, there appears to be inaccurate reporting in that Grantham’s report from Experian provides that her 1051 account is 30 days overdue in November 2010, while at the same time reporting a $0 balance for October and November 2010. Pl.’s Opp’n, Ex. A. BofA attempts to circumvent this apparent inconsistency by arguing that the $0 balance reported in October and November 2010 is “favorable credit information—not adverse information—so it cannot not [sic] be the basis for any damages based on credit reporting claims under the FCRA or any other credit reporting statute.” Mot. at 6. BofA’s argument misplaced. Grantham is not arguing that the $0 balance reporting is adverse information; rather, she argues that her report is in-accurate because it lists an overdue payment while also reporting the balance of zero. Opp’n at 12–13. BofA also appears to go beyond the pleadings and argues that “there is no inconsistency here because even before Bank of America zeroed out Plaintiff’s Account balance, Plaintiff was in default because she had not been making payments on the account, not-withstanding a reported ‘0’ balance.” Mot. at 6. However, at this stage in the pleadings, the Court is required to take all material allegations as true and construe them in the light most favorable to Grantham. Clearly, a reported overdue payment is adverse information. Thus, while BofA is free to raise this argument in a motion for summary judgment after further discovery into Grantham’s allegations, the Court DENIES its motion at this stage.

Judge James also followed El–Aheidab v. Citibank (South Dakota), N.A., 2012 WL 506473, at *7–8 (N.D.Cal. Feb.15, 2012)  and held that the UCL claim was not pre-empted to the extent it was grounded on a non-pre-empted statute – Civ. Code § 1785.25(a). In Montgomery v. Wells Fargo Bank, 2012 WL 5497950 (N.D.Cal. 2012), Judge Henderson found a claim properly pleaded against another bank for post-bankruptcy discharge credit reporting.  Montgomery sought redress under the FCRA and inaccurate or incomplete reporting of a debt that was discharged in bankruptcy.  On March 8, 2010, Montgomery had filed a petition under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California. In a schedule accompanying her bankruptcy petition, Montgomery listed an unsecured debt of $8,718.00 in favor of Wells Fargo. The bankruptcy court discharged Montgomery’s debts on June 2, 2010.  Montgomery alleges that almost a year after her bankruptcy petition was granted, she sent a written notice to the credit reporting agency Equifax in which she informed Equifax that her debt had been discharged.  In her written notice, Montgomery disputed the Bank’s continued reporting to Equifax that her account had been “charged off” and was in “collection.”Equifax then notified Wells Fargo that Montgomery disputed the accuracy of its reporting. (Compl. at ¶¶ 10, 23.)  Montgomery further alleged that, had Wells Fargo reasonably investigated her dispute of the “charged off” notation, it would have found two notices that had been sent to it from the bankruptcy noticing center that stated that Montgomery’s debt had been discharged in bankruptcy.  Plaintiff alleged that Wells Fargo verified the obligation as “open” and “charged off.” (Compl. at ¶ 24.)   Judge Henderson found that the Plaintiff had properly pleaded an inaccuracy:

The dispute in the present case centers around the significance of the term “charge off.” The FCRA permits credit reporting agencies to retain a notation in an individual’s credit report that a debt has been “charged to profit and loss”—in other words, charged off—for seven years. 15 U.S.C. § 1681c(a)(4). Black’s Law Dictionary, defines “charge off” as “to treat (an account receivable) as a loss or expense because payment is unlikely; to treat as a bad debt.” Black’s Law Dictionary 266 (9th Ed.2009). “Bad debt,” in turn, is defined as “[a] debt that is uncollectible and that may be deductible for tax purposes.” Id. at 462. ¶   Wells Fargo argues that its reporting of Montgomery’s discharged debt as charged off is accurate because Wells Fargo treats the account as bad debt. Montgomery contends that Wells Fargo’s reporting is inaccurate because the “charged off” notation suggests that the debt is legally, if not practically, collectable. In support of her position, Montgomery cites to a Federal Trade Commission staff opinion letter which states that: “In our view, it is not a reasonable procedure to label an account that has been discharged in bankruptcy as “charged off as bad debt” if the account was open and not charged off when the consumer filed bankruptcy. Such a designation would be inaccurate or misleading, because it would indicate that the creditor had written off the account at the time of bankruptcy when it had not in fact done so.”  Letter from Clarke W. Brinkerhoff, Federal Trade Comm’n, to Michael Lovern, Sr., Trial Mngmnt. Assocs. (April 24, 1998). Wells Fargo concedes that reporting as charged off an account that was open and not charged off at the time the consumer filed for bankruptcy, “would be not only inaccurate, but false.” (Doc. No. 16 at 2.) The parties therefore agree that if a consumer has an account that is open and has not been charged off at the time the consumer files for bankruptcy, it is inaccurate to report the debt associated with that account as charged off after it is discharged.  ¶  In support of its contention that its reporting of Montgomery’s debt as charged off is accurate, Wells Fargo cites to a second FTC staff opinion letter, which states that “nothing in the FCRA … prohibits a creditor from reporting to a [consumer reporting agency] that an account which has been discharged in bankruptcy has also been charged off so long as the credit grantor has in fact charged off the account.” Letter from Clarke W. Brinkerhoff, Federal Trade Comm’n, to Peter L. McCorkell, Fair, Isaac and Co., Inc. (June 3, 1999). In essence, Wells Fargo seems to contend that it charged off Montgomery’s account before she filed for bankruptcy and that its reporting of her debt as charged off is therefore accurate.  ¶  Wells Fargo’s argument is problematic in two respects. The first is that Wells Fargo reads too much into Montgomery’s complaint: Montgomery does not allege that Wells Fargo ever actually charged off her debt. She alleges only that Wells Fargo reported to Equifax that Montgomery’s debt was charged off after the debt had been discharged in bankruptcy. Viewing this allegation in the light most favorable to Montgomery, a plausible inference may be drawn that Montgomery’s Wells Fargo account was open and not charged off at the time she filed for bankruptcy. Wells Fargo has conceded that under those circumstances, its reporting would be inaccurate. Drawing permissible inferences in Montgomery’s favor, her complaint sufficiently alleges inaccuracy. ¶  The second problem with Wells Fargo’s argument is that the FCRA and the CCRAA require that furnishers’ reports to consumer reporting agencies be complete, as well as accurate, and Montgomery does not allege that Wells Fargo ever reported to Equifax that her account was discharged in bankruptcy. 15 U.S.C.A. § 1681s–2(b)(1); Cal.Civ.Code § 1785.25(a). The Ninth Circuit considered a parallel issue in Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147 (9th Cir.2009). In Gorman, the court concluded that a furnisher that had accurately reported an account as “delinquent” could nevertheless be held liable under the FCRA for failing to report that the consumer disputed the debt. Id. at 1162–64. The Court held that a claim under § 1681s–2(b)(1)(D) need not be supported by evidence that the report is “patently incorrect” if the report is “misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.” Id. at 1163 (internal quotation marks and citation omitted). The Court reasoned that “[i]t is the failure to report a bona fide dispute, a dispute that could materially alter how the reported debt is understood, that gives rise to a furnisher’s liability under § 1681 s–2(b).” Id.  ¶  In the context of the present case, Wells Fargo’s failure to report that Montgomery’s debt had been discharged in bankruptcy—separate and apart from the whether the account was charged off—could materially alter how the debt was understood. A bankruptcy discharge relieves the consumer of any legal obligation to repay the discharged debt, see 11 U.S.C. § 727(b), whereas a consumer may be liable to repay a debt that has been charged off. Even if Wells Fargo’s reporting of Montgomery’s debt as “charged off” was technically accurate, it might still be misleading or incomplete. Cf. Cisneros v. U.D. Registry, Inc., 39 Cal.App.4th 548, 579, 46 Cal.Rptr.2d 233 (Cal.Ct.App.1995) (concluding that a consumer reporting agency has not ensured the “maximum possible accuracy” of information when the information “is misleading or incomplete, even if it is technically accurate.”) FN4 Montgomery alleges that even after completing its investigation, Wells Fargo refused to correct its reporting of her debt. Drawing reasonable inferences in Montgomery’s favor, her complaint states a claim that Wells Fargo breached its duty to report to Equifax that the information it had previously provided about Montgomery’s debt—its report that her account had been “charged off”—was incomplete because it had failed to report that Montgomery’s debt had been discharged in bankruptcy. See 15 U.S.C. § 1681s–2(b)(1)(D); Cal. Civ.Code § 1785.25(a); Gorman, 584 F.3d at 1163.

Judge Henderson also held that a Plaintiff need not plead that a furnisher received notice of the dispute from the CRA, only that the consumer disputed the CRA.

Wells Fargo also contends that Montgomery has insufficiently pled that it received notice from Equifax that she disputed the completeness or accuracy of the “charged off” notation. A consumer reporting agency is required under 15 U.S.C. § 1681i(a)(2) to provide notice of a dispute to the furnisher of the disputed information within five business days of receiving notice of the dispute from a consumer. A furnisher’s duties under § 1681 s–2(b) “arise only after the furnisher receives notice of the dispute from the [consumer reporting agency].” Gorman, 584 F.3d at 1162. If Wells Fargo did not receive notice from Equifax, it had no duty to investigate the completeness and accuracy of its reporting related to Montgomery’s account; therefore, if Montgomery has insufficiently pled notice, she has failed to state a claim.  ¶  As set out above, Montgomery alleges that: (1) on April 30, 2011, she sent written notice to Equifax that she disputed the “charged off” notation; (2) Equifax notified Wells Fargo of the dispute; (3) Wells Fargo verified that it received notice from Equifax; (4) Wells Fargo reported back to Equifax that Montgomery’s account had been “charged off”; (5) on April 31, 2011, Montgomery received from Equifax a copy of her credit report on which her Wells Fargo account was listed as “charged off”; and (6) Wells Fargo thereafter continued to refuse to correct its reporting. These allegations are sufficiently detailed to enable Wells Fargo to defend itself. See Wang v. Asset Acceptance, LLC, No. 09–4797, 2010 WL 2985503, at *5 (N.D.Cal. July 27, 2010) (rejecting argument that plaintiff must plead that furnisher received notice with greater particularity on ground that the defendant failed to “explain how Wang or similarly situated individuals would have access to those ‘facts’ without formal discovery”).