Sherman v. Sheffield Fin., LLC
| Docket Number | Civil No. 20-1764 (JRT/LIB) |
| Decision Date | 14 September 2022 |
| Citation | 627 F.Supp.3d 1000 |
| Parties | Jesse G. SHERMAN, Plaintiff, v. SHEFFIELD FINANCIAL, LLC, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Mark L. Vavreck, GONKO & VAVRECK, PLLC, 401 North Third Street, Suite 640, Minneapolis, MN 55401; and Thomas J. Lyons, Jr., CONSUMER JUSTICE CENTER PA, 367 Commerce Court, Vadnais Heights, MN 55127, for plaintiff.
Aaron A. Myers and Andrew R. Shedlock, KUTAK ROCK LLP, 60 South Sixth Street, Suite 3400, Minneapolis, MN 55402, for defendant.
In March 2016, Plaintiff Jesse Sherman and his then-spouse took out a joint loan from Defendant Sheffield Financial, LLC ("Sheffield") and set up automatic payments on the loan. In 2019, Sheffield cancelled the automatic payments, Sherman missed two payments, and Sheffield charged off the loan after Sherman's nowformer spouse filed for bankruptcy. After Sheffield reported the missed payments and charged off loan to Sherman's credit history maintained by the various credit reporting agencies ("CRAs"), Sherman filed a series of six disputes through the CRAs about Sheffield's report. Sherman brings this action alleging Sheffield's handling of these disputes violated the Fair Credit Reporting Act ("FCRA"). At the heart of the matter is whether Sheffield was required to note that Sherman had disputed the information even though its reporting was technically accurate. The parties have filed cross motions for summary judgment.
FCRA requires furnishers of credit report data such as Sheffield to note the existence of a consumer's bona fide, potentially meritorious dispute if the failure to note the dispute is materially misleading. For three of the disputes Sherman filed, Sheffield had sufficient information such that it had a duty to note that Sherman had a bona fide dispute. For the other three, there is a factual dispute as to whether Sheffield had enough information. Further, because Sheffield had a policy to never acknowledge bona fide disputes even when the failure to do so was materially misleading so long as the report was technically accurate and Sheffield acted in accordance with that policy here, Sheffield's actions were willful as a matter of law. A dispute of material fact remains as to Sheffield's actual damages.
The Court will deny Sheffield's Motion for Summary Judgment in its entirety. It will grant Sherman's Motion for Summary Judgment in part and deny it in part. It will grant Sherman's Motion as it relates to (1) whether Sheffield's actions violated the FCRA when responding to Sherman's last three disputes and (2) whether Sheffield's violations were willful. The Court will, however, deny Sherman's Motion as to whether Sheffield violated the FCRA in its response to Sherman's first three disputes. After this Order, a trial will be necessary to resolve (1) whether Sheffield violated the FCRA on the first three disputes Sherman filed, (2) whether Sherman suffered actual damages and, if so, the value of those damages, and (3) whether to award punitive damages and, if so, in what amount.
In March 2016, Sherman and his then-spouse, Amy Sherman ("Amy"), financed the purchase of a Polaris Ranger ATV by taking out a loan with Sheffield. (Decl. of Mark Vavreck ("Vavreck Decl."), Ex. E ("Sherman Dep.") at 12:16-23, Nov. 1, 2021, Docket No. 51.) Both were on the loan and were joint account holders of the Sheffield loan account. (Id. at 15:11-19; Vavreck Decl., Ex. B ("Loan Application") at 4-5.)1 They were required to make payments on the loan by the thirtieth day of each month. (Loan Application at 5.) They signed up to make their payments via automatic withdrawals from their bank account. (Id. at 2.)
In April 2018, Sherman and Amy divorced. (Vavreck Decl., Ex. C.) Sherman received the ATV in the divorce and took on responsibility for the outstanding debt. (See id. at 7.)
On September 4, 2019, Amy filed for Chapter 7 bankruptcy. (Vavreck Decl., Ex. D.)2 In her bankruptcy filing, she included the ATV in her list of property, noting that she had an interest in the property, but that it was "[n]ot in [her] possession" because it was "[a]warded to [her] ex-husband per divorce decree." (Id. at 11, 18.) She listed BB&T as a secured creditor for the ATV, noting she had no value of collateral for the debt and that it was in Sherman's possession.3 (Id. at 20.) The bankruptcy filing stated that Amy intended to surrender the ATV. (Id. at 41.)
In mid-September 2019, Sheffield received notice of Amy's bankruptcy filing. (Vavreck Decl., Ex. F ("Wiles Dep.") at 42:12-22, 50:2-5; Decl. of Andrew R. Shedlock ("Shedlock Decl."), Ex. G ("Collection History") at 1, Nov. 1, 2021, Docket No. 47.) Sheffield cancelled the automatic payments on the loan and stopped sending out monthly account statements. (Answer ¶ 31, Sept. 18, 2020, Docket No. 7; Wiles Dep. at 29:7-16.) Sheffield did not notify Sherman or Amy that it was cancelling the automatic payments. (Wiles Dep. at 18:4-21.)
Until Sheffield cancelled the automatic payments, every monthly payment was made in full and on time. (Vavreck Decl., Ex. A ("Account History") at 2-5.) After Sheffield cancelled the payments in September 2019, no payments were made in September or October 2019. (Id.) It is undisputed that these payments were required, and the failure to pay means that Sherman missed two required payments on the loan. It is also undisputed that Sherman still had an obligation to make payments even though Sheffield cancelled the automatic payments and that he could have made manual payments. (See Sherman Dep. at 24:25-25:14.)
On October 31, 2019, Sheffield "charged off" the account because a person on the account was in bankruptcy, there were missed payments causing the account to be more than 30 days past due, and the bankruptcy filing indicated the borrower intended to surrender the collateral. (Wiles Dep. at 29:17-21, 64:9-15, 65:20-66:13; Collection History at 1.) Sheffield then began reporting this information to the credit reporting agencies for inclusion on Sherman's credit report. (See Vavreck Decl., Ex. I ("Grimes Dep.") at 71:5-71:24; Wiles Dep. at 76:10-13.)
In November 2019, Sherman noticed that his credit score was dropping from Credit Karma.4 (Sherman Dep. at 13:18-14:22.) Credit Karma indicated that the cause was late payments to Sheffield. (Sherman Dep. at 14:3-5.) On November 13, 2019, Sherman called Sheffield several times to inquire why the automatic payments stopped and to figure out what was happening. (Id. at 14:6-22; Collection History at 2.) During the calls, Sheffield informed Sherman that one of the people on the account had filed for bankruptcy and so Sheffield stopped the automatic payments. (Id. at 14:6-11; Collection History at 2.) On November 14, 2019, Sherman paid the past due amounts by phone. (Account History at 5.) He also resumed monthly payments. (Id. at 5-6; Sherman Dep. at 28:15-20.) On February 6, 2020, Sherman paid off the remaining balance on the loan. (Account History at 6; Sherman Dep. at 28:11-14.) The Sheffield line of his credit report changed from "Charged Off" to "Charged Off Paid in Full." (Sherman Dep. at 72:6-9.) The late payments and the charge off remained on Sherman's credit history. (E.g., Vavreck Decl., Ex. M ("Experian ACDV").)
Sherman also began trying to get the negative information removed from his credit reports. On December 18, 2019, Sherman called Sheffield to ask it to remove the information. (Collection History at 4.) Sheffield advised him that it cannot change his report but that he could file a dispute through a CRA. (Id.) He made similar calls with similar results on January 16 and 17, 2020. (Id. at 5.)
On January 17, 2020, Sherman filed a credit history dispute with Equifax. (Shedlock Decl., Ex. N. ("1st Equifax ACDV").) When a consumer files a dispute with a CRA as to how a lender is reporting a line on a credit history, the CRA generates an Automated Consumer Dispute Verification ("ACDV") for this indirect dispute that it then sends along to the furnisher of the disputed information.5 (See id.) On January 20, 2020, Sheffield sent the ACDV back to Equifax indicating that its information was accurate: two payments were missed and the balance was charged off. (Id.; Collection History at 5.) On January 22, 2020, Sherman called Sheffield to inquire why it confirmed its previous report was correct. (Collection History at 5-6.) He was told to resubmit the dispute and to specifically mention the bankruptcy because the first dispute did not. (Id. at 6.)
On January 22 and 29, 2020, Sherman filed new disputes through Equifax. (Vavreck Decl., Ex. J ("2nd Equifax ACDV"); Vavreck Decl., Ex. K ("3rd Equifax ACDV"); Collection History at 6-7.) Sheffield again responded that it was accurately reporting the account as two payments were missed and the loan had been charged off. (2nd Equifax ACDV; 3rd Equifax ACDV.)
In February 2020, Sherman hired attorney Kevin Duffy to assist him with the situation. Duffy sent letters to the CRAs Experian, TransUnion, and Equifax disputing how Sheffield was reporting the loan, generating new ACDVs from each of these CRAs.6 (Shedlock Decl., Ex. R ("Experian ACDV") at 2-3; Shedlock Decl., Ex. S ("4th Equifax ACDV") at 4-5; Collection History at 7.) Sheffield responded to the Experian, TransUnion, and Equifax ACDVs that its reporting was correct: two payments were paid after their due date and the account was charged off. (Collection History at 7; Experian ACDV at 31; Vavreck Decl., Ex. N ("TransUnion ACDV") at 2; Vavreck Decl., Ex. P ("White Dep.") at 59:10-61:22, 63:9-25.)
In addition to the particular details of a person's credit history, credit reports can indicate whether a consumer has disputed a...
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