Ms. Kingery applied to Quicken Loans for a loan to refinance her home mortgage and gave permission for it to retrieve her credit reports. On May 3, 2010, Quicken Loan retrieved her tri-merge credit reports, which showed her credit scores and also that foreclosure had been commenced against her home. Based on the pending foreclosure, as shown by manually entered notes, Quicken Loans denied her refinance request. Subsequently, Quicken Loans transferred Ms. Kingery to its credit repair program. When that was unsuccessful, Quicken Loans sent Ms. Kingery a final denial letter on May 24, 2010, which, among other information, gave Ms. Kingery the the full statutory notice provision set forth in 15 U.S.C. §1681g(g)(1)(D), which provides, inter alia:
In connection with your application for a home loan, the lender must disclose to you the score that a consumer reporting agency distributed to users and the lender used in connection with your home loan, and the key factors affecting your credit scores.
Ms. Kingery later brought suit against Quicken Loans arguing that it had not sent her the § 1681g(g)(1) disclosures in a reasonable amount of time.
Pursuant to 15 U.S.C. § 1681g(g)(1)(A), when a mortgage lender “uses a consumer credit score … in connection with an application initiated or sought by a consumer for a closed end loan or the establishment of an open end loan for a consumer purpose that is secured by 1 to 4 units of residential real property . . . .” (Emphasis added.) All parties agreed, and the courts seem to take as obvious, that the word “use” requires “more than merely obtaining, possessing, or storing” credit scores, instead requiring a showing that Quicken Loans had “employ[ed] the consumer’s score to achieve a purpose or objective, such as employing the score to make a decision with respect to a loan application.” Accordingly, while Quicken Loans did integrate the credit scores into its computer system, that by itself was clearly insufficient. No evidence was presented by Ms. Kingery that her credit scores were used, with the only testimony being that the pending foreclosure was the basis for denial.
As it found that Quicken Loans had not used her credit scores in denying her loan, the Circuit Court did not reach the question of whether the disclosures were sent (which Quicken Loans contended were not required but always giving for over-compliance) in a reasonable amount of time.
As to the over-compliance Quicken Loans in sending the §1681g(g)(1)(D) in all denials, because, according to Quicken Loans’ corporate counsel, “it would be too burdensome to make a determination of ‘use’ of a client’s credit score on a case by case basis”, may itself be problematic. While not raised by Ms. Kingery, the purposes of the Fair Credit Reporting Act, this over-compliance does not provide the consumer with accurate information about the basis for the denial of a loan, which is a fundamental purpose of FCRA and denies the consumer the ability to correct, dispute or remedy the actual problem. Whether this might give rise to a different cause of action is unclear.
It does also strain credulity that Quicken Loans, which touts itself as “a technology and marketing company that happens to do mortgages”, See Wall Street Journal, June 14, 2015, “Quicken Loans Takes On the U.S.”, cannot use its own internal coding showing that Ms. Kingery’s loan was denied due to a pending foreclosure to automatically sort and tailor its communications more accurately.
While the denial here was based on a pending foreclosure, it could similarly have been due to judgment liens or bankruptcy. This makes raising FCRA claims following a bankruptcy more complicated. One tack that might have been successful, would have been to determine whether Quicken Loans ever refinanced mortgages where there was a pending foreclosure, but the consumer had a credit score high enough to compensate. This could imply that the foreclosure (or bankruptcy) was not by itself always the exclusive determinative factor, but affected by credit scores.
For a copy of the opinion, please see: