District Court (Cal.) Dismisses FCRA ID Theft Case

In Petrou v. Navient Corporation, 2018 WL 3020160 (S.D.Cal., 2018), the District Court found that a mere claim of identity theft did not render the reporting of an account inaccurate within the context of the substantive laws governing the collection of student loans.

Plaintiff alleges that his daughter, Selaina A. Petrou, in order to fund her undergraduate education, fraudulently obtained two student loans in his name. (ECF No. 1, Exh. B (“FAC”) ¶ 7-9). According to Plaintiff, on April 26, 2012, his daughter signed a Master Promissory Note, without his consent or knowledge, for a Federal Direct PLUS Loan (“Master Promissory Note”) in his name. Id. ¶ 9-10. As a result, on April 30, 2012, Sallie Mae distributed $9,752 to the daughter’s university, as a Parent Plus Loan under the Master Promissory Note. Id. ¶ 11. In May 2013, Plaintiff, at the request of his daughter, faxed additional paperwork to her university, believing that she was applying for another student loan under her own name. Id. ¶ 13-14. As a result, on May 7, 2013, Sallie Mae distributed another $40,253 to the daughter’s university as a Parent Plus Loan under the Master Promissory Note. Id. ¶ 14-15.On December 18, 2014, Plaintiff received a letter from Navient, the loan management subsidiary of Sallie Mae, regarding payment of the two Parent Plus loans. Id. ¶ 17. On May 15, 2015, Plaintiff sent a letter to Navient disputing the legitimacy of the Master Promissory Note. Id. ¶ 18. Navient responded that before it could investigate, Plaintiff needed to fill out an Identity Theft Affidavit and file an Identity Theft Report with the San Diego police department. Id. ¶ 19. After filing a police report, on October 5, 2015, Plaintiff sent Navient the Identity Theft Affidavit and all related documentation. Id. ¶ 19-20. On November 12, 2015, Navient informed Plaintiff that it could not confirm his claim of identity theft and closed the investigation. Id. ¶ 21. Plaintiff alleges that Navient made “minimal effort” in investigating his claims and closed the investigation “after only a few attempts” at contacting Plaintiff’s daughter, which were unsuccessful. Id. ¶ 41. Plaintiff also alleges that he notified the consumer reporting agency (“CRA”) that the loans were fraudulently obtained. Id. ¶ 44.Navient has attempted to collect payment on the two Parent Plus Loans from Plaintiff in the principle amount of $50,015. Id. ¶ 22.

The District Court found no inaccuracy in the Plaintiff’s Consumer Report.

Plaintiff simply alleges that “these loans appear on [his] credit report and will continue to jeopardize [his] credit rating as he attempts to rectify the situation.” FAC ¶ 23. Construed in the light most favorable to Plaintiff, the statement appears to allege that the credit report is incomplete or inaccurate because the loans should not appear on his credit report due to his unajudicated claim of identity theft. However, the unadjudicated claim of identity theft, alone, is insufficient factual content to show an inaccuracy in Plaintiff’s credit report. 20 U.S.C. § 1087(c)(1) provides that[i]f a borrower who received, on or after January 1, 1986, a loan made, insured, or guaranteed under this part and the student borrower, or the student on whose behalf a parent borrowed, is unable to complete the program in which such student is enrolled due to the closure of the institution or if such student’s eligibility to borrow under this part was falsely certified by the eligible institution or was falsely certified as a result of a crime of identity theft…then the Secretary [of Education] shall discharge the borrower’s liability on the loan (including interest and collection fees) by repaying the amount owed on the loan.Crucially, Plaintiff does not allege that he obtained this necessary false certification discharge. See United States v. Lopez, 2013 WL 12090619, at *3 (N.D. Cal. May 28, 2013) (“20 U.S.C. § 1087 is an exclusive administrative remedy. The case law is clear that no private cause of action is created under 20 U.S.C. § 1087.”). The inclusion of undischarged student loans in Plaintiff’s credit report cannot be incomplete or inaccurate, particularly prior to any resolution of Plaintiff’s identity theft claim.Further, it is clear that even with leave to amend his FAC, Plaintiff would not be able to allege that he obtained a false certification discharge. “In the case of an individual whose eligibility to borrow was falsely certified because he or she was a victim of the crime of identity theft and is requesting a discharge,” one of the required documents to be provided to the Secretary of Education is “a copy of a local, State, or Federal court verdict or judgment that conclusively determines that the individual who is named as the borrower of the loan was the victim of a crime of identity theft.” 34 C.F.R. § 685.215. In his response to Defendants’ motion to dismiss, Plaintiff states that he “is properly seeking to disclaim the loans” and that his current cause of action against Selaina Petrou for fraud is intended to obtain a judgment for purposes of 34 C.F.R. § 685.215. See Opposition to Motion to Dismiss at 7. As long as Plaintiff’s fraud claim is pending, he cannot seek a false certification discharge. Therefore, Plaintiff’s FCRA claim against Defendants is, at best, premature.