Illinois app. Court (3rd District) denies FCRA ‘punitive damages’ claim due to insufficient supporting allegations

The Illinois Third District Court of Appeals recently overturned a trial court’s order dismissing a debtor’s federal counterclaim under the Fair Credit Reporting Act against a bank.

In this judgment, the Court of Appeal held that:

(1) the statement in support of the bank’s motion to dismiss the material allegations improperly denied in the debtor’s FCRA counterclaim; and

(2) The trial court correctly dismissed the debtor’s motion to amend its claim to include a claim for punitive damages because the debtor did not allege any facts to support an allegation according to which the bank allegedly deliberately violated the FCRA.

A copy to the notice in Bank of America, NA vs. Yun is available on: Link to Reviews.

The appeal arose out of a collection action filed by a bank (“creditor”) against a credit card account holder (“debtor”). The debtor asserted counterclaims against the creditor, including claims of violations of the federal Truth in Lending Act (TILA) and the FCRA. The creditor requested the dismissal of the counterclaims due to the statute of limitations and the trial court granted the requests. The Debtor appealed (the “First Appeal”) and the Court of Appeal upheld the dismissal of the TILA claim, but reversed the dismissal of the FCRA claim.

While on remand, the debtor offered to amend his application to the FCRA to include a claim for punitive damages and his motion was denied.

The creditor requested dismissal, arguing that the FCRA’s claim failed in law because there was no evidence that the creditor received a dispute as alleged. The debtor also filed an incidental motion to strike out the creditor’s motion to dismiss and for civil contempt.

The trial court denied the debtor’s motions and granted the creditor’s motion to dismiss the FCRA’s claim with prejudice. The debtor appealed the orders denying leave to amend, civil contempt relief and striking out the creditor’s motion, and the order granting the creditor’s motion to dismiss.

The debtor argued that the trial court erred in granting the motion to dismiss because the creditor had failed to provide any admissible affirmative questions to vacate its counterclaim. The creditor argued that the trial court correctly ruled that the debtor’s FCRA claim had failed in law.

As you may recall, under the FCRA, a provider may be subject to civil liability if they fail to comply with FCRA requirements. See 15 USC §§ 1681n, 1681o (2018). The FCRA requires a consumer reporting agency (“CRA”) to notify a provider when it receives notification from a consumer of an alleged error in the consumer’s credit report. See 15 USC §§ 1681i(a), 1681s-2(b) (2018). A provider’s duty to investigate does not arise under the FCRA until the CRA notifies the creditor of a dispute.

The debtor alleged that he notified a CRA of the creditor’s alleged billing errors, that the creditor failed to correct the errors, and that the creditor continued to issue erroneous negative credit reports based on the errors.

Along with its Motion to Dismiss, the Creditor provided the Statement of the Assistant Vice President and Creditor Operations Consultant within the Creditor’s Legal Operations and Case Resolution Group. The statement said the creditor had no record of receiving an Automatic Consumer Dispute Check (“ACDV”) from an ARC with reference to the debtor’s account during the relevant period.

The debtor argued that the statement was insufficient because it was not an affidavit and did not provide sufficient affirmative material to support the creditor’s motion to dismiss.

The Court of Appeal found the statement sufficient on form, as the information was based on the declarant’s personal knowledge, a search of the creditor’s records, and was made under penalty of perjury. See Ill. S. Ct. R. 191 (eff. 4 Jan. 2013); see also 735 ILCS 5/1-109 (West 2018).

However, the Court of Appeal also concluded that, while the form is sufficient, the substance of the statement was not an “affirmative question” but rather “evidence which refutes a well-founded fact of the complaint”. Griffin vs. Universal Casualty Co., 274 Ill. App. 3d 1056, 1063 (1995) (citing Chicago Title & Trust Co. v. Weiss, 238 Ill. App. 3d 921 (1992)).

The Court of Appeals explained that the statement merely identified a factual issue that was not appropriate for a motion to dismiss, as it denied a material allegation in the debtor’s FCRA counterclaim. Accordingly, the Court of Appeal set aside the order granting the creditor’s motion to dismiss.

The debtor then argued that the trial court erred in denying his motion to amend his claim to include a claim for punitive damages. Punitive damages are only available when a defendant acted voluntarily, under the FCRA. See 15 USC § 1681n (2018). Conduct that creates “a high risk of undue hardship that is known or so obvious that it ought to be known” is willful. Redman vs. RadioShack Corp.768 F.3d 622, 627 (7th Cir. 2014) (citing Farmer vs. Brennan511 US 825, 836 (1994)).

The Court of Appeals noted that, as the trial court correctly found, the debtor alleged no facts to support a claim that the creditor willfully violated the FCRA. As such, the Court of Appeal concluded that the trial court’s decision was not an abuse of power.

Finally, the debtor argued that the trial court erred in dismissing his motion for civil contempt. The debtor argued that the creditor manipulated court orders and submitted court orders without the consent of the debtor or the trial court. The Court of Appeal concluded that the record refuted this argument and therefore upheld the dismissal of the motion for civil contempt.

Accordingly, the Court of Appeal set aside the trial court’s order granting the creditor’s motion to dismiss and affirmed the other orders.

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