District Court (Cal.) Says Debt Collector Acted Properly from FDCPA and Credit Reporting Standpoint Following ID Theft Claim

In Blackmon v. Ad Astra Recovery Servs., Case No.: 20-CV-800-CAB-JLB, 2021 U.S. Dist. LEXIS 75878 (S.D. Cal. April 20, 2021), Judge Bencivengo granted summary judgment to a debt collector who was alleged to have committed errors in connection with handling a purported claim of identity theft.   After the debtor failed to submit an affidavit of theft or police report but then retained counsel, the debt collector ceased collection and reported the account as “disputed”.

Though not clearly articulated in her complaint, Blackmon’s opposition brief suggests that her § 1692e claims are premised on AARS’s continual reporting of the Speedy Cash loan account to the credit reporting agencies after Blackmon notified AARS that she believed the account to be fraudulent. [Doc. No. 23 at 9-10.] Blackmon argues that because she does not owe the debt,2 Defendant’s attempts to “hold her responsible for the balance” and “seek collection on the fraudulent account” by reporting the loan to the credit reporting agencies constitute FDCPA violations. [Id.]  First, AARS continuing to report the loan account after Blackmon notified AARS of potential fraud does not constitute a false, deceptive or misleading representation under the FDCPA. Blackmon initially notified AARS that the Speedy Cash loan was fraudulent on January 8, 2019. During the January 8th call, the AARS representative did not assert that Blackmon was responsible for the debt or attempt to collect from her. Rather, the representative told Blackmon that getting the account off her credit was “not a problem” and gave her instructions for providing AARS with documentation to support her fraud claim. [Doc. No. 22-4 at 2.] An allegation of fraud or identity theft, without more, does not give rise to an FDCPA violation. See Patton v. Fin. Bus. & Consumer Sols., Inc., No. 2:16-CV-2738 JCM (CWH), 2018 U.S. Dist. LEXIS 126614, 2018 WL 3620488, at *3 (D. Nev. July 30, 2018) (“Patton’s contention that he was a victim of identity theft and that he never opened the [disputed account] does not give rise to a FDCPA violation.”); Story v. Midland Funding LLC, No. 15-cv-194-AC, 2015 U.S. Dist. LEXIS 161525, 2015 WL 7760190, at *7 (D. Or. Dec. 2, 2015) [*10] (“[C]ommunications regarding that debt are not deemed false, misleading, or deceptive simply because the alleged debt was incurred through identity theft.”); Taylor v. Midland Credit Mgmt., No. 1:07-CV-582, 2008 U.S. Dist. LEXIS 14328, 2008 WL 544548, at *3 (W.D. Mich. Feb. 26, 2008) (“Even if Taylor is correct in his assertion that he does not owe the Debt, his assertion that he is being pursued for a debt he does not owe is not sufficient in and of itself to make out a claim of false or misleading representations under § 1692e.”).  Further, AARS fulfilled its legal duties upon Blackmon’s notification that she disputed the debt. Blackmon asserts that AARS wrongly continued to report the debt after its initial phone call with her on January 8, 2019. However, “a collection agency does not have a duty to delete all references to a debt whenever such debt is contested.” Bloom v. I.C. Sys., Inc., 972 F.2d 1067, 1069 (9th Cir.1992) (finding no “false” representation when the debt collector requested further written verification that no debt was owed and immediately reported the debt as disputed). AARS began reporting the debt as “disputed” to the credit reporting agencies the very same day that it initially spoke to Blackmon. Despite Blackmon’s failure to provide the requested documentation substantiating [*11] her fraud claim,4 AARS continued to report the debt as disputed and made no attempt to collect the debt from that day forward.
Moreover, when Blackmon’s counsel sent AARS a formal written dispute of the account, AARS fulfilled its duty under 15 U.S.C. § 1692g to verify the account by validating the original loan agreement and related documentation from its client, Speedy Cash. [Doc. No. 24-2 at 4.] See Clark, 460 F.3d at 1173-74 (“Verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed.”) (internal citations omitted). The FDCPA does not impose upon the debt collector a duty to independently investigate the claims presented by the alleged debtor. AARS was only required to confirm with its client the amount being claimed, which it did, and it was therefore entitled to rely on its client’s statements in continuing to report the debt. See id. at 1174; see also Landaker v. Bishop, White, Marshall & Weibel, P.S., No. C12-5898 RJB, 2012 U.S. Dist. LEXIS 171985, 2012 WL 6025741, at *4 (W.D. Wash. Dec. 4, 2012) (“A debt collector is entitled to rely on the creditor’s statements to verify the debt, within reasonable limits, and a debt collector does not have a duty to independently  investigate claims presented by creditor. There is nothing false, unfair, or unconscionable in the actions of Bishop,” where after receiving Plaintiff’s statement that the debt was not his, Bishop verified the debt and requested documentation to support Plaintiff’s claim).  In assessing FDCPA liability, the Court is concerned with “genuinely misleading statements that may frustrate a consumer’s ability to intelligently choose his or her response.” Donohue, 592 F.3d at 1034. None of AARS’s communications undermined Blackmon’s ability to intelligently choose her action concerning the loan account. After Blackmon told the AARS representative on the January 8, 2019 call that she wanted to get the loan account off her credit report, the representative gave her specific instructions for how to do so. The representative advised Blackmon that she could obtain a police report or complete, sign and notarize a fraud affidavit available on www.ftc.gov, send either one to AARS’s office via fax, and include a letter of dispute describing her fraud allegation. [Doc. No. 22-4.] The representative also gave Blackmon the account number associated with the loan and invited her to call back if she needed any further information.  Subsequently, in the November 25, 2019 letter to Blackmon’s counsel, AARS again delineated how Blackmon could substantiate the alleged identity theft. [Doc. No. 22-5 at 1.] There was nothing about AARS’s statements that would confuse or mislead even the least sophisticated debtor’s attempt to remove the fraudulent account from their credit report.  The record reflects that AARS did not use any false, deceptive, or misleading representation or means in connection with the collection of the debt at issue here. Accordingly, AARS is entitled to summary judgment on Blackmon’s § 1692e claims.

The District Court found that the debt collector did not know or should have known that it was reporting inaccurate information.

There is no indication before the Court that AARS knew or should have known that the information it reported to the credit reporting agencies regarding Blackmon’s alleged debt was incomplete or inaccurate. As discussed above, AARS fulfilled its duty to verify the debt by confirming with Speedy Cash that the loan account was valid. See Clark, 460 F.3d at 1173-74. AARS was under no obligation to conduct further independent investigation of Blackmon’s fraud claim. Additionally, despite AARS’s requests for corroborating evidence, Blackmon never provided AARS with written documentation of the alleged fraud. Blackmon’s unsubstantiated claim of identity theft, without more, is insufficient to create liability under the CCRAA. See Toroussian v. Asset Acceptance, LLC, No. CV 12-03519 DDP (AGRx), 2013 U.S. Dist. LEXIS 145007, 2013 WL 5524831, at *5 (C.D. Cal. Oct. 4, 2013) (finding that Plaintiff’s claim that she was a victim of identity theft alone did not establish Defendant’s liability under CCRAA when Plaintiff never provided Defendant with requested documentation supporting her claims).

Finally, the District Court found that because the debt collector had closed the Account by the time the debtor filed suit, the debtor could state no claim under California’s Identity Theft statute.

Because AARS closed Blackmon’s loan account by April 2020 and did not possess an interest in any debt or collection efforts against Blackmon when she filed this lawsuit, Blackmon’s CITA claim against AARS was not viable when she filed suit on April 29, 2020. See Romero v. Monterey Fin. Servs., LLC, No. 19cv1781 JM (KSC), 2021 U.S. Dist. LEXIS 15934, 2021 WL 268635, at *8 (S.D. Cal. Jan. 27, 2021) (finding that debt collector was not a “claimant” as a matter of law after it closed Plaintiff’s account and permanently divested itself of its interest in the account prior to Plaintiff’s lawsuit being filed); see also Soria v. U.S. Bank N.A., No. SACV 17-00603-CJC(KESx), 2019 U.S. Dist. LEXIS 70068, 2019 WL 8167925, at *9 (C.D. Cal. April 25, 2019) (“As U.S. Bank has closed the loans, it is undisputed that U.S. Bank does not assert a claim against [the alleged identity theft victim] related to the [closed loans].”). Accordingly, AARS is entitled to summary judgment on Blackmon’s CITA claim.