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Strohbehn v. Access Group Inc.

United States District Court, E.D. Wisconsin

November 14, 2017




         1. INTRODUCTION

         In 2003, Plaintiff obtained students loans to pay for law school. In 2007, after she graduated and found work, she attempted to pay them off in one large payment. She came close to doing so, but through an accounting error (whether hers or otherwise), a small balance remained owing. The balance sat, unpaid, for almost a decade. In 2016, Defendants began employing various means to attempt collection of the balance. Plaintiff claims their efforts violated the Fair Credit Reporting Act (“FCRA”), the Fair Debt Collection Practices Act (“FDCPA”), the Wisconsin Consumer Act (“WCA”), and Wisconsin's privacy laws.

         Each party has moved for summary judgment, and each motion is fully briefed. For the reasons explained below, Plaintiff's motion will be granted, Defendant Access Group, Inc.'s (“Access”) motion will be granted in part, and Defendant Weltman, Weinberg & Reis, Co., L.P.A.'s (“WWR”) motion will be granted in part and denied in part.[1] The Court will also address Plaintiff's motions to strike, filed in mid-August 2017.


         2.1 Standard of Review

         Federal Rule of Civil Procedure (“FRCP”) 56 states that the “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Boss v. Castro, 816 F.3d 910, 916 (7th Cir. 2016). A “genuine” dispute of material fact is created when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court construes all facts and reasonable inferences in a light most favorable to the non-movant. Bridge v. New Holland Logansport, Inc., 815 F.3d 356, 360 (7th Cir. 2016). In assessing the parties' proposed facts, the Court must not weigh the evidence or determine witness credibility; the Seventh Circuit instructs that “we leave those tasks to factfinders.” Berry v. Chicago Transit Auth., 618 F.3d 688, 691 (7th Cir. 2010).

         2.2 Factual Background

         Though the parties have submitted voluminous factual material, only a relatively small portion of it is relevant to the Court's disposition.[2] In the interest of brevity, the Court has limited its factual recitation accordingly. It notes the parties' disputes where appropriate.[3]

         From 2003 to 2006, Plaintiff obtained five separate student loans through Access to help pay for law school. Plaintiff was loaned a total of $60, 000, with the individual loans ranging from $1, 000 to $16, 000. Though they were disbursed at separate times, all were subject to the same contractual terms. The loan agreements provided that Plaintiff had two repayment options: “either 1) consecutive monthly payments until all interest and principal] [was] paid over 240 months or 2) minimum monthly payments of $50 (that might result in paying off the loan before the expiration of 240 months).” (Docket #146 at 7). The agreements further stated that Plaintiff had “the right to prepay all or any part of” the loans “at any time without penalty.” See, e.g., (Docket #93-3 at 4).

         From 2003 to 2009, the servicer for her loans was Kentucky Higher Education Student Loan Servicing Corporation (“KHESLC”). Plaintiff's first payment on her loans was due in April 2007. When that time came, Plaintiff attempted to consolidate and pay off her loans through a loan consolidation company called CIT Group, Inc. (“CIT”). Through CIT, Plaintiff paid $68, 051 in a single lump sum to pay off all five loans at once (the “Consolidation Payment”). Despite her belief that the Consolidation Payment would eliminate her loan balances entirely, fees and interest had raised Plaintiff's total loan balance to approximately $73, 000. Thus, the Consolidation payment only satisfied two of the loans, leaving a total balance on the three remaining of approximately $5, 000.

         Plaintiff did not send any instructions on how to apply the Consolidation Payment. Without such instruction, KHESLC applied the payment in accordance with its own internal policies. KHESLC's policy provided that prepayments, such as the Consolidation Payment, would be used to pay off any currently due fees, interest, and principal. Any excess funds would then be applied to successive future monthly payments until the funds ran out. This would, in effect, postpone the due date for Plaintiff's next required monthly payment in accordance with the amount of excess funds. In Plaintiff's case, the Consolidation Payment was so large that Plaintiff would remain in “prepaid” status until January 2016. Plaintiff notes that there was no mention in the agreements of postponing the due date of future payments as provided in KHESLC's policy. Rather, the agreements provided for regular monthly payments of at least $50 so long as a balance remained outstanding, which has always been the case.

         Access began servicing Plaintiff's loans directly from June 2009 to March 2012. Upon taking over from KHESLC, Access sent Plaintiff written materials about her loans. These explained Access' prepayment policy, which was substantially similar to that employed by KHESLC. Defendants maintain that each servicer repeatedly sent Plaintiff billing statements which indicated that her loans were prepaid until January 2016 and that she did not owe any monthly payments until that time. Plaintiff disputes receiving many of these notices, and reiterates that the statements could not retroactively change the terms of the loan agreements.

         In March 2012, Access brought in ACS Education Services (“ACS”), also known as Xerox, to service the loans. The conduct which directly underlies Plaintiff's claims began in 2016. When Plaintiff's prepaid status ended in January 2016, ACS began to report the debts as delinquent to the three major credit bureaus, also known as credit reporting agencies (“CRAs”). ACS reported Plaintiff's debts in accordance with their servicing duties to Access. Each debt was reported as a separate tradeline on her credit. The information ACS used to create the tradelines was provided by Access, and Access warranted to ACS that the information was accurate.

         On March 3, 2016, Plaintiff sent letters to the CRAs disputing the entries regarding her student loans. She claimed that the debts should not be reported as delinquent because the statute of limitations applicable to them had expired. See, e.g., (Docket #136-5). She ended up submitting nine such disputes. Plaintiff's disputes were sent to ACS, as it was the entity that had been reporting the debts. When ACS responded to Plaintiff's disputes, it used the information in its records which had been supplied by Access. ACS responded that its reporting activity was accurate, and the tradelines were not deleted.

         Access itself did not receive the notices from the CRAs and did not otherwise know about the disputes.[4] The parties dispute whether Access is nonetheless responsible for ACS's reporting activity. Plaintiff claims that ACS acted largely at Access' direction, such that ACS should be considered Access' agent. Access counters that although it initially hired ACS to service Plaintiff's loans, any reporting activity and dispute resolution was conducted entirely by ACS with reference to its own internal policies and procedures. As discussed below, the Court must address this disagreement. See infra Part 2.3.3.

         From January to May 2016, Access called Plaintiff approximately five times. Plaintiff does not describe the conversations except to say that Access “stated I owed them money.” (Docket #136 at 2). In August 2016, Access hired WWR to assist its collection efforts. As part of opening Plaintiff's file, WWR obtained Plaintiff's credit score. Plaintiff says that WWR's credit inquiry damaged her credit rating. WWR sent a number of collection letters to Plaintiff's attorneys (she had previously told Access that all contact should go through them). Soon afterward, Access told WWR to cease its collection activity.

         2.3 Analysis

         Plaintiff asserts six causes of action in her operative pleading, the Second Amended Complaint. (Docket #68). As of the date of this Order, the claims are as follows:

Count One - Access violated the FCRA by providing inaccurate information to the CRAs and by failing to conduct a reasonable investigation into Plaintiff's dispute regarding that information. Plaintiff alleges these acts were done willfully, thereby entitling her to increased damages. Id. ¶¶ 43-48.
Count Two - Access violated the Wisconsin Consumer Act (“WCA”) by attempting “to collect on paid bills.” Id. ¶¶ 49-51, 53-54.[5]
Count Three - WWR violated the FDCPA by attempting “collection on paid bills.” Id. ¶¶ 55-60.
Count Four - WWR violated the WCA by “attempting] to collect on paid bills.” Id. ¶¶ 61-65.
Count Five - WWR violated the FCRA by obtaining a copy of Plaintiff's credit report, an act which can depress the target's credit score, without justification. Id. ¶¶ 66-70.
Count Six - WWR violated Plaintiff's right to privacy, codified in Wis. Stat § 995.50, by pulling Plaintiff's credit report. Id. ¶¶ 71-75.

         The other relevant pleading is Access' Answer to the Second Amended Complaint. Therein, Access alleges a cross-claim against WWR, stating that WWR should bear sole liability for any violations of Plaintiff's rights. (Docket #77 at 10). WWR denies this. (Docket #79).

         Plaintiff seeks partial summary judgment not on any particular claim, but on an overarching legal issue. Each Defendant seeks dismissal of all of the claims arrayed against them. The Court will address the parties' motions separately below.

         2.3.1 Plaintiff's Motion

         Plaintiff seeks partial summary judgment on the issue which underlies each of her claims: has the statute of limitations run on her loans, thereby extinguishing the debts and rendering Defendants' collection activity is improper?[6] The applicable statute of limitations in Wisconsin is six years. Wis.Stat. § 893.43. Unlike most states, the expiration of the statute of limitations in Wisconsin means that not only is the creditor barred from filing suit to recover the debt, the debt itself is treated as eliminated. Id. § 893.05; First Nat'l Bank of Madison v. Kolbeck,19 N.W.2d 909 (Wis. 1945); Pantoja v. Portfolio Recovery Assoc, LLC,852 F.3d 679, 684 (7th Cir. 2017) (“We recognize that most states (though not Wisconsin, in this circuit) treat a debt as a debt even after the statute of limitations has run so that it cannot be legally enforced, at least if the defendant appears and asserts the affirmative defense. See, e.g., Buchanan [v. Northland Group, Inc.], 776 F.3d [393, ] 396-97 [(7th Cir. 2015)] (recognizing general rule); cf Wis. Stat. § 893.05 (when statute of limitations expires, “the right is ...

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