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11th Cir. Adopts ‘False Name Exception’ to Creditor Liability Under FDCPA

The U.S. Court of Appeals for the Eleventh Circuit recently reversed the dismissal of a pro se consumer’s claims under the federal Fair Credit Reporting Act (FCRA), holding that he stated a plausible claim for relief with his allegations that the defendant creditor obtained his credit report without his consent, and failed to reasonably investigate his credit reporting disputes.

However, the Court affirmed the trial court’s dismissal of the consumer’s claim under the federal Fair Debt Collection Practices Act (FDCPA) that the creditor defendant used a “false name” in attempting to collect the debt owed to it.

A copy of the opinion in Pinson v. JPMorgan Chase Bank, N.A. is available at:  Link to Opinion.

The plaintiff obtained a copy of his credit report from a credit reporting agency.  The credit report showed a past due account with a finance company with whom he denied having a relationship, but whom he believed was related to the bank that held his mortgage loan.  His mortgage loan was past due.

The plaintiff disputed the debt with the bank and the credit reporting agency. The credit reporting agency responded that the debt “would continue to appear on his credit report” and the bank did not respond. The plaintiff sent a series of follow-up letters to the bank, to which he also did not receive a response.

The plaintiff sent two more letters to the credit reporting agency, who responded the same way as before.

The plaintiff sued the bank, alleging that it “violated the FDCPA’s prohibition on using a name other than a business’s true name in connection with the collection of a debt when [the bank] gave [the credit reporting agency] the name” of the related finance company instead of its own true name.

The plaintiff also alleged that the bank “violated the FCRA by failing to investigate the accuracy of information it provided to [the credit reporting agency] and by requesting his credit report without a permissible purpose.”

The bank moved to dismiss for failure to state a claim, the trial court granted the motion, and the plaintiff appealed.

The Eleventh Circuit addressed whether the plaintiff had standing to sue, concluding that he did because he “alleged actual, concrete, and particularized injuries: that he lost time communicating with [the bank and credit reporting agency]; that he incurred out-of-pocket expenses trying to correct misinformation on his credit report; and that he was denied access to credit and paid higher car insurance premiums as a result of [the bank’s] conduct.”

Besides lost time and money, the Court also found that the reporting of inaccurate information “in itself constitutes a concrete injury” because of its similarity to “the harm caused by the publication of defamatory information, which has long provided the basis for a lawsuit in English and American courts.”

The Eleventh Circuit next rejected the bank’s argument that the complaint was properly dismissed because it was a “shotgun pleading” because while it “adopts the allegations of all preceding counts [and] is perhaps longer than it needs to be[,] … it does what complaints must do: it ‘give[s] the defendant adequate notice of the claims against [it] and the grounds upon which each claim rests.’” The Court also explained that “while this circuit’s shotgun-pleading rule applies to everyone, we ordinarily give pro se litigants more leeway when it comes to drafting.”

Turning to the merits of the complaint, the Court first addressed the claim that the bank violated section 1692e of the FDCPA by using a name other than its true name to collect a debt. The Court concluded that the plaintiff failed to state a plausible claim because he did not sufficiently allege that the bank was a “debt collector.”

The Eleventh Circuit explained that the FDCPA applied to “’debt collector[s],’ defined as persons who ‘regularly collect or attempt to collect’ someone else’s debts. … The FDCPA ordinarily does not apply to creditors trying to collect their own debt.”

Although “there are instances in which creditors collecting their own debt are deemed debt collectors under the statute[,]” namely when a “creditor … in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.”  However, this so-called “false-name exception” did not apply because although the bank allegedly used a false name on the plaintiff’s credit report, the false name “did not indicate that a third person was collecting [plaintiff’s] mortgage.”

The Court went on to explain that it had “not set a standard for assessing when a name would indicate that a third party was involved in collecting a debt — or, put differently, from whose perspective we should assess whether a name would indicate a third party’s involvement. We now join the Second and Seventh Circuits and hold that the false-name exception applies when the ‘least sophisticated consumer’ would believe a third party was involved in collecting a debt.”

“Whether the least sophisticated consumer would think a name indicates a third party’s involvement in collecting a debt will ordinarily present a jury question, though of course whether a plaintiff pleads enough facts to state a claim is a question of law for the court.”

The Eleventh Circuit then reasoned that even though “the least sophisticated consumer standard is a low bar, [plaintiff] cannot meet it.” This is because even the most unsophisticated consumer “would understand that [the bank] and [the finance company] were related entities collecting his mortgage with [the bank]” given that they shared a word in common, one was the bank and the other an apparent subsidiary or affiliate.

Because the least sophisticated consumer would not be fooled by the use of the word “finance” or by one entity using “N.A.” and one “LLC” into believing a third party was collecting the subject mortgage debt, the Court concluded that the plaintiff failed to state a claim under the FDCPA and affirmed the trial court’s ruling on this basis.

Turning to the FCRA claims, the Eleventh Circuit first addressed whether the bank “failed to investigate the accuracy of the information it provided to [the credit reporting agency][,]” finding that the plaintiff plausibly alleged that the bank “willfully failed to comply with the FCRA’s investigation requirement.”

This is because the plaintiff alleged he had disputed the “allegedly false entry on his credit report with [the credit reporting agency] at least three times … [and] [e]ach time, [the credit reporting agency] had a statutory duty to notify [the bank] of the dispute.” The bank’s “failure to investigate not once but three times plausibly indicates reckless disregard of the investigation requirement.”

Finally, the Court concluded that the plaintiff stated a viable claim that the bank unlawfully obtained his credit report for an improper purpose and also obtained it under false pretenses.

The bank may have obtained the plaintiff’s credit report improperly because the complaint alleged the bank “obtained his credit report for use in litigation twenty times between May 10, 2013 and October 13, 2014[,]” during which time the bank had litigation pending with the bank. “It may violate the FCRA to obtain a consumer report for use in litigation [because] [l]itigation does not appear in the exhaustive list of purposes for which the FCRA authorizes a person to obtain a credit report.” The fact that this was done many times meant that the plaintiff “also adequately alleged a willful violation of the statute.”

The Court agreed with the bank that if it obtained the plaintiff’s credit report “to review or collect a consumer’s account” it would not face liability because that is a permissible purpose under FCRA, but noted that “all we have at this stage in the litigation are the allegations of [the] complaint, which we must credit.”

The Eleventh Circuit then addressed FCRA section 1681q, which “makes it a crime to ‘knowingly and willfully obtain information on a consumer from a consumer reporting agency under false pretenses[,]’” explaining that while “[t]his circuit has never addressed the meaning of ‘false pretenses’ in § 1681q of the FCRA[,] [c]onsistent with every other court to address this issue, we now hold that intentionally  obtaining a credit report under the guise of a permissible purpose while intending to use the report for an impermissible purpose can constitute false pretenses under § 1681q. … Negligent misrepresentation of the purpose will not suffice for liability under § 1681q; the offending party must intentionally misrepresent his purpose for obtaining the credit report.”

The Court concluded that the plaintiff “has alleged enough to state a violation of § 1681q” because he alleged that the bank knowingly misrepresented the purpose for obtaining his credit information for use in litigation. Although the bank “may have obtained [plaintiff’s] credit reports for a perfectly proper purpose … [o]r it may have disclosed its true purpose to [the credit reporting agency], in which case it did not obtain the report under false pretenses[,] … this fact question cannot be resolved on a motion to dismiss.”

Accordingly, the Eleventh Circuit reversed the trial court’s dismissal of the plaintiff’s FCRA claims, affirmed the dismissal of his FDCPA claim and remanded the case for further proceedings.

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Hector E. Lora manages the firm’s Florida office and has substantial experience in all phases of complex commercial litigation, including bench and jury trials as well as appellate practice. Hector represents lenders, servicers, debt collectors and debt buyers in complex mortgage foreclosure actions, quiet title actions, federal TILA, RESPA, TCPA, and FDCPA actions and Florida FCCPA actions brought by borrowers or debtors. He also represents creditors in bankruptcy litigation, purchasers of accounts receivable or factoring companies that provide revenue-based financing to small and mid-sized businesses in collection actions, and landlords in commercial and residential evictions. Hector’s broad litigation experience includes over a decade of defending civil enforcement actions filed by the Federal Trade Commission as well as real estate contract disputes and partition actions, contested mortgage foreclosure and condominium lien foreclosure actions and the foreclosure of UCC Article 9 security interests. Hector also has advised a variety of types of businesses regarding their compliance with applicable federal and state consumer protection laws, including the Federal Trade Commission Act, the Telephone Consumer Protection Act (TCPA), the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Controlling the Assault of Nonsolicited Pornography and Marketing Act of 2003, and Florida laws governing telephone solicitation and communication. Hector received his Juris Doctor from the Georgetown University Law Center, and his undergraduate degree with honors from the University of Florida. For more information, see