Alert

FCRA Claims Fail as Mortgagor Could Not Satisfy His Repayment Obligations by Tendering Another Promise to Pay

October 16, 2024

On September 19, 2024, the District Court for the Eastern District of New York dismissed claims against the mortgage lender, its mortgage servicer, and credit reporting agencies under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., New York Uniform Commercial Code § 9-210 et seq., and common law defamation for lack of standing because plaintiff’s self-inflicted injury was a result of his personal choices rather than defendant’s conduct.[1]

Case Background

In Castro, plaintiff asserted that he satisfied his obligations under the mortgage loan by tendering a promissory note, which purportedly was equal in value to the amount of the mortgage debt and was accepted by the mortgagee as collateral for the loan. Plaintiff subsequently disputed the reporting of the loan with the credit reporting agencies and commenced a pro se lawsuit because the loan continued to be reported as unpaid.

Although plaintiff alleged that his credit reports were inaccurate because they showed an outstanding balance on the mortgage that should not exist because he allegedly repaid the debt, the court noted that he made no factual allegations from which it could plausibly infer that a personally signed promissory note would clear the balance on a mortgage loan. Rather, the court in Castro stated that “there is no basis for concluding that a mortgage loan, i.e., a promise to pay, can be satisfied by yet another promise to pay.”

Court’s Decision

Accordingly, the court concluded that plaintiff failed to plausibly allege that any of the defendants acted unlawfully by treating and reporting the mortgage loan as unpaid and that he was thereby injured by their conduct. Instead, the Castro court held that the only plausible inference is that plaintiff’s own erroneous choice of trying to satisfy his outstanding mortgage loan balance with a promissory note, rather than with real money, caused the negative credit reports and his subsequent denial of credit. Thus, plaintiff was found to lack Article III standing, and his claims were dismissed. 

The Takeaway

Castro reminds us that while debtors continue to proliferate inventive ploys to escape their repayment obligations and to manufacture grounds for liability under consumer protection statutes, rigid enforcement of the injury in fact requirement enables federal courts to efficiently filter out baseless suits.

[1] Castro v. Newrez LLC, 2024 WL 4242138 (E.D.N.Y. Sept. 19, 2024).