District Court (Ky.) Says FCRA Plaintiff States Claim against Auto Finance Lender Based on Issuance of 1099-C where 1099-C Form Itself Said that Debt Was Discharged By Agreement of the Parties

In Baker v. American Financial Services, Inc., 2016 WL 4030964, at *3 (W.D.Ky., 2016), Judge Stivers allowed an FCRA claim to proceed where the debtor claimed that the reporting of a debt was inaccurate because a 1099-C Form filed by the auto finance lender stated that the debt had been discharged by agreement of the parties.

The parties urge the Court to adopt one of two views regarding the legal effect of a Form 1099-C. The first view favors the creditor and finds that the filing of a Form 1099-C is irrelevant in determining discharge. See, e.g., FDIC v. Cashion, 720 F.3d 169, 176-81 (4th Cir. 2013); Owens v. Comm’r, No. 02-61057, 2003 WL 21196200, at *3 (5th Cir. May 15, 2003); Capital One v. Massey, No. 4:10-CV-01707, 2011 WL 3299934, at *3 (S.D. Tex. Aug. 1, 2011); United States v. Reed, No. 3:09-CV-210, 2010 WL 3656001, at *2 (E.D. Tenn. Sept. 14, 2010). Alternatively, the second view favors the consumer and establishes the opposite. See, e.g., In re Reed, 492 B.R. 261, 268 (Bankr. E.D. Tenn. 2013); In re Crosby, 261 B.R. 470, 476-77 (Bankr. D. Kan. 2001)); In re Welsh, No. 06-10831ELF, 2006 WL 3859233, at *2 (Bankr. E.D. Pa. Oct. 27, 2006). The Court finds it unnecessary to adopt either view in this case. The Court considers only whether Baker has plausibly stated a claim upon which relief can be granted based on the facts alleged in the Complaint. Iqbal, 556 U.S. at 678. In this regard, Baker has plausibly stated a claim. Specifically, an admission by the creditor within the Form 1099-C plausibly indicates discharge even if the mere filing of the form does not. Here, GMF indicated in the Form 1099-C that discharge by agreement of the parties was the identifiable event which triggered the filing by reference in the form to Subpart G of the Regulation. (Pl.’s Resp. Ex. A). GMF appears to have acknowledged on the face of the Form 1099-C that Baker’s debt had been discharged. Discovery may ultimately prove discharge did not in fact occur, but at this stage the Court finds Plaintiff’s allegation of discharge is plausible. Therefore, GMF’s motion will be denied regarding Baker’s FCRA claims.