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Credit Reporting Agency Sued for FCRA Violation Based on Alleged Inaccurate Reporting of Mortgage Delinquency During COVID-19 ForbearanceRead Time: 2 mins
On March 24, 2022, a complaint was filed against Equifax Information Services, LLC based on its alleged inaccurate reporting of a mortgage loan delinquency. The borrowers filed the two-count complaint in the U.S. District Court for the Southern District of California, alleging Equifax violated the Fair Credit Reporting Act (FCRA) and the California Consumer Credit Reporting Agencies Act (CCRAA). The borrowers contend Equifax failed to follow reasonable procedures to establish maximum possible accuracy in the preparation of the borrowers’ credit reports. As a result, they seek actual, statutory, and punitive damages, attorney fees and costs, and other relief.
In support of their claims, the borrowers state they obtained a mortgage loan on their primary residence and timely made the necessary payments each month, up until their loan went into forbearance due to the COVID-19 pandemic. The borrowers contend that during this forbearance period, Equifax prepared a credit report that “wrongfully indicated [the borrowers] were delinquent.” Following the completion of the forbearance, the borrowers sold their home, and the loan was paid in full. They maintain their mortgage servicer sent an Automated Universal Data form (AUD) to Equifax requesting the date of default and delinquency reporting be removed. However, the borrowers claim that in applying for another mortgage loan, they discovered that Equifax continued to report their account as delinquent during the forbearance period. As a result of the alleged inaccurate reporting, the borrowers contend their credit scores decreased significantly. They suffered emotional distress. They could not obtain financing and lost the opportunity to purchase a new house that now has considerably appreciated in value.
As forbearance periods mandated by the Cares Act conclude, there is an increased amount of litigation resulting from alleged inaccurate credit reporting. Although this matter is in its infancy, the issues surrounding alleged incorrect credit reporting will be worth watching over several months as case law begins to develop.
Reprinted with permission from the American Bar Association’s Business Law Today May Month-In-Brief: Business Regulation & Regulated Industries.