Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Daniel Gill
A mortgage company’s ‘soft pulls’ of a debtor’s credit reports didn’t violate the Fair Credit Reporting Act even though her debt had been wiped out in bankruptcy, a Nevada federal judge ruled March 22 ( Vanaman v. Nationstar Mortg., LLC , 2017 BL 90928, D. Nev., Case No. 2:15-CV-00906-KJD-NJK, 3/22/17 ).
In an opinion of interest to both debtors and creditors who routinely pull credit reports, Judge Kent J. Dawson of the U.S. District Court for the District of Nevada found no violation of the federal consumer protection law since the property in question was still subject to a lien favoring the creditor. This was true even after the property was sold, so the debtor didn’t have title.
When Kim Vanaman filed a Chapter 13 bankruptcy Dec. 22, 2009, she owned a property subject to a mortgage. In Chapter 13, those receiving regular income are allowed debt relief while retaining their property. To do so, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three- to five-year period.
Vanaman converted her case to Chapter 7 on Dec. 11, 2012. In Chapter 7, a debtor’s nonexempt assets, those she cannot keep, are liquidated by a trustee, and the proceeds are distributed to creditors. Subject to certain exceptions, the debtor is awarded a discharge, effectively wiping out her debts.
She got her discharge on May 1, 2013. Later that year, Nationstar Mortgage, LLC, took over servicing the mortgage on the property.
When Vanaman got her discharge, that meant she was no longer liable for the mortgage serviced by Nationstar. However, the lien was unaffected, even after the Chapter 7 trustee sold the property—subject to the lien being serviced by Nationstar—on Dec. 13, 2013.
Nationstar, “in the regular course of business, performs ‘soft pulls’ of consumer reports for its mortgage accounts,” including summaries of outstanding balances, addresses, theft or fraud alerts or other basic credit information, the court explained. They are less specific and detailed than “hard pulls” taken for the purpose of extending credit, it said.
Because she was no longer liable for the mortgage, Vanaman filed a complaint for damages under the fair credit reporting law, but Nationstar successfully moved the court for summary judgment.
The court found that Nationstar’s ordinary course soft pulls were not a willful violation of the fair credit law and they “were not so patently violative of Plaintiff’s rights as to give rise to claim for statutory damages.”
Christopher P. Burke, Las Vegas, Nev., represented Vanaman. Nationstar was represented by Troutman Sanders LLP, Richmond, Va. and Kravitz, Schnitzer & Johnson, Chtd., Las Vegas, Nev.
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To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
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