District Court (Mich.) Says Auto Finance Lender Properly Reported Charged-Off Account Balance without Giving Plaintiff Credit for Vehicle Sale as a “Payment”

In Shelton v. Americredit Fin. Servs., Inc., No. 23-10543, 2023 U.S. Dist. LEXIS 58218, at *4-8 (E.D. Mich. Apr. 3, 2023), Judge Michelson dismissed an FCRA claim by an in pro per Plaintiff premised on the basis that an automobile finance company did not credit as a “payment” sums that it received for a repossessed vehicle’s sale.

Start with the first and second objections. Both assume that Shelton should receive credit on the loan from the proceeds of the auction. Essentially, she believes that the proceeds should count as a payment she made to AmeriCredit which, in turn, should reduce the total amount charged off. Shelton provides no factual or legal support for that assumption. And Michigan law cuts against it. Michigan’s Uniform Commercial Code “generally governs the laws of commercial transactions, and Article 9 governs secured transactions.” See Dow Chem. Employees’ Credit Union v. Geiling, No. 337117, 2018 WL 2746331, at *12 (Mich. Ct. App. June 7, 2018). While Shelton did not provide any loan documents from her transaction with AmeriCredit, they are an essential part of the complaint and the Court assumes that the contract is a secured transaction under the UCC.2See, e.g., id. (applying UCC to boat and vehicle loan); McGee v. Michael Andrews & Assocs., No. 18-13231, 2019 WL 2539344, at *3 (E.D. Mich. June 20, 2019) (applying UCC to vehicle loan); In re Pizzano, 439 B.R. 445, 450 (Bankr. W.D. Mich. 2010) (same); Gillom v. Ralph Thayer Auto. Livonia, Inc., 444 F. Supp. 2d 763, 764 (E.D. Mich. 2006) (same). Under the UCC, the loan was likely a “security agreement” between Shelton and AmeriCredit. See Mich. Comp. Laws §§ 440.9102(ttt). To oversimplify a bit, this means that AmeriCredit gave Shelton a loan and possession of the vehicle in exchange for her promise to make regular payments on the loan. §§ 440.9102(fff), (sss). But to guard against the risk that Shelton would default on the loan, the agreement made the vehicle “collateral,” meaning that AmeriCredit retained a “security interest” in it. § 440.9102(l). That security interest gave AmeriCredit the right to “take possession of the collateral” if Shelton defaulted on the loan. See Mich. Comp. Laws § 440.9609(1)(a)). Once it did that, it could sell the collateral and use the proceeds to satisfy the loan. See Mich. Comp. Laws §§ 440.9610(1), 440.9615(1)(b). Put differently, following Shelton’s default, the security agreement gave AmeriCredit the legal right to repossess the vehicle, sell it, and apply the proceeds to the outstanding loan balance. Because AmeriCredit was legally entitled to the proceeds of the auction after Shelton defaulted, it is not clear why Shelton should receive credit against the loan for those funds. It follows that there was nothing false or misleading about its report to TransUnion in this respect.

The District Court also rejected the contention that the report was inaccurate because the charge-off appeared for several month.

Shelton’s third objection is that the report listed the account as charged off for several months, which allegedly “makes it confusing as to when the account was charged off.” (ECF No. 1, PageID.3.)  A very similar argument has been rejected by another court in this District. See Shaw v. Equifax Info. Sols., Inc., 204 F. Supp. 3d 956 (E.D. Mich. 2016). There, the plaintiff claimed that her lender “inaccurately reported that the account was charged off on multiple occasions over a 7-8 month period.” Id. at 961. But after explaining that the FCRA allows charged-off accounts to be reported for seven years, the Court dismissed her claim. Id. at 960 (citing 15 U.S.C. § 1681c(a)(4)). It explained that  the report showed, “nearly three years of ‘on-time’ payments, to delinquent payments, to being in default, to having the account charged off, all of which are indisputably accurate.” Id. And it concluded that because “the account can continue to record [as charged off] until April 2018, it is clear to the industry that the chargeoff began to run in April 2011 (seven years earlier).” Id. at 961. Thus, in the full context of the report, “there [was] nothing to indicate, as Plaintiff intimates, that anyone would believe there has been more than one charge off[.]” Id.  The same result follows here. The report shows several years of account history, none of which Shelton has plausibly pled are inaccurate. (ECF No. 1.) And, similar to Shaw, it says that the “estimated month and year that this item will be removed” is October 2028, seven years from the date of default. See Shaw, 204 F. Supp. 3d 961. In other words, the report accurately reflects the account history: it entered default in October 2021, was charged off in March 2022, and will stop reporting in October 2028. So there is nothing to suggest that the multiple chargeoffs listed in the report are misleading. Id. And even if Shelton was confused, a “consumer’s conclusory allegation that a report is misleading is insufficient to meet [the] standard delineated by the Sixth Circuit.” See Thompson v. Equifax Info. Servs., LLC, 441 F. Supp. 3d 533, 548 (E.D. Mich. 2020). That leaves the final objection. In a single sentence, Shelton says “[t]here was no payment received for October [2021], however the defendant furnished the account as OK in October.” (ECF No. 1, PageID.3.) True. But the November 2021 payment status was listed as “30,” meaning the account was 30 days late. And, as explained, the estimated date of removal also indicates that there was no payment in October 2021. So the full report accurately reflects the information that Shelton claims is false. In sum, Shelton failed to plausibly plead that any of the “inaccuracies” in her credit report are false or misleading.