Oral arguments in the Holden/Mayer v. Holiday Inn Club Vacations (HICV) appeals are scheduled for October 3rd. HICV is accused of violating the Fair Credit Reporting Act (FCRA) by not adequately investigating disputes. This is the subject matter of a few lawsuits currently on appeal with the Eleventh Circuit Court of Appeals in Jacksonville, Florida.
An Amicus Curiae brief was jointly filed by the Consumer Financial Protection Bureau and the Federal Trade Commission on December 16, 2022. The brief urged the Court of Appeals to reverse a decision made by a lower court against timeshare Plaintiffs Tanethia Holden and Mark Mayer. Credit reporting agency Experian was named in the original lawsuit, filed in 2019, but as stated in the plaintiffs’ Opening Brief, Experian settled with plaintiffs in a confidential settlement.
In a similar case, on April 14, 2023, the CFPB also filed an amicus brief supporting timeshare consumers in Belair v. Holiday Inn Club Vacations Inc., Case No. 6:21-cv-165-WWB-DCI. In all the lawsuits, HICV argued that an investigation was not merited because the dispute was a “legal” rather than a “factual” matter. The CFPB contends that HICV should “conduct reasonable investigations of both legal and factual questions posed in consumer disputes.”
Luis Lopez filed a lawsuit against Westgate Resorts, Equifax and Experian on June 26, 2023, in the Western District of Oklahoma case No. 5:23-cv-oo561, alleging that Westgate violated the Fair Credit Reporting Act (FCRA) by reporting inaccurate information and that Westgate erroneously reported their account as a foreclosure despite Mr Lopez not allowing his account to proceed to foreclose,
In a separate class action, without admitting wrongdoing, Experian agreed to pay $22.45 million as part of a lawsuit settlement to resolve claims it incorrectly reported residential information as high risk.
“Experian continues the practice of parroting the response from the furnisher even though it has been repeatedly sued for failing to conduct a reasonable investigation as required by the FCRA,” or Fair Credit Reporting Act, the Experian class action lawsuit contends.
Timeshare Developers are not lenders?
The CFPB is the federal agency that regulates banking and lending. Timeshare developers are massive lenders, but borrowers cannot file a complaint with the CFPB against a timeshare company. The reason is that developers are not considered lenders, so not an option on the CFPB’s drop-down menu. Timeshare members can file a timeshare complaint with the CFPB through the backdoor by filing a complaint against a credit reporting agency (CRA) if the consumer feels the CRA is reporting inaccurate information on the borrower’s credit report. Timeshare consumers can “Tell Your Story” to the CFPB and should do so.
Fact vs Law
Attorney Michael Finn, one of the attorneys of record representing the HICV plaintiffs, explained the difference between fact and law: “Laws are laws, but facts can be disputed. Juries, and in many instances, judges, are referred to as ‘triers of the facts’. When the material facts essentially are not in dispute, the judge may then apply the law based on prior case law and applicable statutes to determine the outcome of a case without holding a trial. In lawyer parlance, this is known as a ‘summary disposition’.”
In lay terms, consider a car accident case. Two “fact” witnesses may disagree on whether a traffic light was yellow, red or green. The law would state unequivocally at which point in the intersection the light change resulted in a traffic violation.
What’s important, is that the FTC and the CFPB appear to be listening, and have taken significant actions to support the timeshare consumer. In an unrelated lawsuit, filed against Bluegreen Vacations, that accused Bluegreen of violating the Military Lending Act, the CFPB and FTC filed an Amicus Brief and filed a motion on August 23, 2023, asking for five additional minutes to participate in oral arguments. Those oral arguments are scheduled for October 6th. I will be attending both oral arguments, especially in light of the harm done to active duty service members who find their security clearances in jeopardy because of a timeshare loan default, or even delinquent on maintenance fees. Timeshares have little to no secondary market. Loans are financed at between 12% to 19.99%.
Following are highlights of the Holden/Mayer Plaintiff-Appellant v Holiday Inn Vacation Club (f.k.a Orange Lake) Defendant-Appellee Amicus Brief, followed by excerpts from the original lawsuit filed in 2019. The furnisher is Holiday Inn because they provide the information to the credit reporting agency.
Brief of Amici Curiae
Consumer Financial Protection Bureau and Federal Trade Commission in Support of Plaintiffs-Appellants and Reversal
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Nos. 22-11014, 22-11734
This case presents a question about the scope of a furnisher’s duty to investigate an indirect dispute.
The district court decisions at issue unduly narrow the scope of a furnisher’s obligations by holding that furnishers need not investigate indirect disputes involving “legal” inaccuracies. These decisions run counter to the purpose of the FCRA to require a reasonable investigation of consumer disputes and would limit consumers’ ability to obtain correction of potentially harmful inaccuracies on their consumer reports.
- The Fair Credit Reporting Act
- Information contained in consumer reports has critical effects on Americans’ daily lives. Consumer reports are used to evaluate consumers’ eligibility for loans and determine the interest rates they pay, ascertain their eligibility for insurance and set the premiums they pay, and assess their eligibility for rental housing and for checking accounts. Prospective employers also commonly use consumer reports in their hiring decisions.
- To further ensure that consumer reports are accurate, in 1996, Congress amended the FCRA to also impose “duties on the sources that provide credit information to CRAs, called ‘furnishers’ in the statute.” These duties include requiring furnishers to investigate when consumers dispute information that the furnisher has given to a CRA. Under the Act, furnishers have an obligation to investigate potential inaccuracies in two circumstances:
(i) when a consumer submits an “indirect” dispute to a CRA, which must forward the dispute to the furnisher under 15 U.S.C. § 1681i(a); and
(ii) when a consumer submits a dispute directly to the furnisher, see id. § 1681s-2(a)(8) and (b).
The Act requires a furnisher, after it receives notice of an “indirect” dispute from a CRA pursuant to § 1681i(a)(2), to:
(A) [C]onduct an investigation with respect to the disputed information;
(B) [R]eview all relevant information provided by the consumer reporting agency pursuant to section 1681i(a)(2) of this title;
(C) [R]eport the results of the investigation to the consumer reporting agency;
(D) [I]f the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis; and
(E) [I]f an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under [§ 1681s-2(b)(1)], for purposes of reporting to a consumer reporting agency only, as appropriate, based on the result of the reinvestigation promptly –
(i) [M]odify that item of information;
(ii) [D]elete that item of information; or
(iii) [P]ermanently block the reporting of that item of information.
A consumer may sue a furnisher for willful or negligent noncompliance with its obligation to perform an investigation under § 1681s-2(b).
- Despite Congress’s repeated efforts to promote accuracy, errors persist in consumer reports. Between January and September 2021, the Bureau received more than 500,000 complaints about credit or consumer reporting, and the most common issue consumers identified was incorrect information on a credit report. (emphasis added) See Consumer Fin. Prot. Bureau, Annual Report of Credit and Consumer Reporting Complaints (Jan. 2022), at 21,30
Factual and Procedural Background
- Plaintiff-Appellant Mark Mayer entered into a timeshare agreement with Defendant-Appellee Holiday Inn Club Vacations Incorporated (HICV) in 2014 for a property in Cape Canaveral, Florida. Mr. Mayer made monthly payments for approximately three years, but ceased making payments in 2017. In 2019, Mr. Mayer mailed HICV letters that disputed the validity of, and purported to rescind, the agreement, while permitting HICV to retain all prior payments as liquidated damages.
HICV moved for summary judgment in October 2021, alleging that Mr. Mayer’s claim—that he was not contractually obligated to make the payments to HICV that are reported on his credit report as being due—“is inherently a legal dispute and is not actionable under the FCRA.”
The district court granted HICV’s motion for summary judgment.
The court then found that the parties’ dispute in this case—which it characterized as being about whether a liquidation clause in the timeshare contract excused Mr. Mayer’s payment obligations and therefore rendered inaccurate the credit reporting about an unpaid balance—was a “legal” contractual dispute, and “not a factual issue that would support a FCRA claim.”
- Plaintiff-Appellant Tanethia Holden entered into a timeshare agreement with Defendant-Appellee HICV in 2016. Ms. Holden made a down payment and the first three installment payments, but then did not make any additional payments. In 2017, Ms. Holden mailed letters to HICV that disputed the validity of, and attempted to cancel, the agreement. The timeshare deed was recorded in June 2017, and HICV reported to Experian that Ms. Holden was delinquent on her payments. Ms. Holden submitted letters to Experian in June, September, and November 2018, disputing the credit reporting.
After Experian communicated the disputes to HICV, HICV determined there was no inaccuracy in the reporting.
Ms. Holden filed this suit in December 2019, alleging (in the only claim remaining) that Defendant violated 15 U.S.C. § 1681s-2(b) when it verified the accuracy of her credit report without conducting reasonable investigations following receipt of her indirect disputes about credit reporting inaccuracies.
The district court granted HICV’s motion for summary judgment.
The court did not reach the question of whether HICV’s investigations of Ms. Holden’s indirect disputes were reasonable.
Her appeal was consolidated with Mr. Mayer’s on July 15, 2022.
SUMMARY OF ARGUMENT
This Court should reverse the district courts’ judgments and clarify that furnishers are required to, and can be held liable for failing to, conduct reasonable investigations of both legal and factual questions posed in consumer disputes.
Many inaccuracies in consumer reports could be characterized as legal, which would create an exception that would swallow the rule. Consumer reports generally include information about an individual’s debt obligations, and debts are generally creatures of contract. Thus, many inaccurate representations pertaining to an individual’s debt obligations arguably could be characterized as legal inaccuracies, given that determining the truth or falsity of the representation could require the reading of a contract.
This Court has an opportunity to join its sister circuit in holding that the FCRA does not categorically exempt disputes raising legal issues from the investigations that the FCRA requires of furnishers under § 1681s2(b)
This Court should also reject a formal distinction between factual and legal investigations because it will likely prove unworkable in practice.
“[C]lassifying a dispute over a debt as ‘factual’ or ‘legal’ will usually prove a frustrating exercise.” The same dispute could be characterized as either factual or legal—or both.
This Court should hold that there is no exemption in the FCRA’s reasonable investigation requirement for legal questions. Such an exemption would curtail the reach of the FCRA’s investigation requirement in a way that runs counter to the purpose of the provision to require meaningful investigation to ensure accuracy on credit reports. It would also result in an unworkable standard where mixed questions of fact and law are presented, and it would encourage the evasion of statutory obligations by allowing furnishers to characterize disputes as legal.
The federal agencies charged with enforcing the statute have thus agreed, including in litigation before this Court, that the statute does not distinguish between legal and factual inaccuracies.
Excerpts from the original lawsuit filed in December of 2019. The information contained in the lawsuit complaint contains useful background information.
UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION Case 6:19-cv-02373-CEM-EJK
TANETHIA HOLDEN, an individual, Plaintiff, v. HOLIDAY INN CLUB VACATIONS INCORPORATED, f/k/a ORANGE LAKE COUNTRY CLUB, INC., and EXPERIAN INFORMATION SOLUTIONS, INC., Defendants.
This is an action for damages for violations of the Fair Credit Reporting Act (FCRA), wherein HICV improperly credit-reported and subsequently verified a consumer loan account allegedly owed to HICV on Plaintiff’s consumer credit report and in Plaintiff’s consumer credit file as maintained by Experian.
More specifically, HICV failed to perform its duties as required by a contractual agreement entered into between Plaintiff and HICV, after Plaintiff advised HICV that she did not owe a balance on the account, and after Plaintiff disputed HICV’s reporting of such erroneous information directly to Experian.
Under the FCRA, if a consumer disputes the completeness or accuracy of any item of information contained in a consumer’s file, and the consumer notifies the agency directly of such dispute, the agency shall reinvestigate—free of charge—and report the current status of the disputed information, or delete the item from before the end of the 30-day period beginning on the date on which the agency receives notice of the consumer’s dispute.
On or about June 25, 2016, Plaintiff entered into an agreement with HICV acquiring a personal property timeshare membership for a total purchase price of $17,571.80.
Pursuant to the Agreement, the transaction is not deemed closed until the deed is recorded in Plaintiff’s name. Additionally, the transaction is not deemed closed until Plaintiff makes the first three timely payments under the Agreement, at which time the deed will be recorded. Plaintiff’s first payment under the Agreement was due by December 22, 2016.
The Agreement also states that time is of the essence with respect to HICV’s performance, and upon HICV’s default of any term of the Agreement, Plaintiff may elect to rescind and terminate the Agreement. Additionally, the Agreement includes a clause stating that upon Plaintiff’s default of any term of the Agreement, HICV shall retain all monies paid by Plaintiff until the date of default as liquidated damages.
Between December 2016 and March 2017, Plaintiff made the first three payments to HICV as required by the Agreement. On or about March 9, 2017, Plaintiff retained Finn Law Group, P.A. (FLG) as her legal counsel with respect to the Debt.
As of March 9, 2017, despite Plaintiff making her first three payments to HICV, HICV had not recorded the deed in Plaintiff’s name. herefore, pursuant to the Agreement, the sale transaction was not closed as of March 9, 2017.
In other words, even though Plaintiff made her first three payments, HICV still did not timely record the deed in Plaintiff’s name; therefore, HICV breached the clause stating that time is of the essence with respect to HICV’s performance under the Agreement.
Additionally, despite HICV knowing that it failed to timely record the deed in Plaintiff’s name—a necessary step to close and/or finalize the sales transaction per the explicit terms of the agreement drafted by HICV—and despite HICV knowing Plaintiff rescinding her consent to close the transaction prior to HICV recording the deed, HICV continued to communicate with Plaintiff in an attempt to collect a balance on the Debt, and also reported a balance due on the Debt by Plaintiff to Experian.
On or about June 19, 2017, after Plaintiff repeatedly advised that she no longer intended to make any payments pursuant to the Agreement and that the Agreement was null and void as a result of HICV’s failure to timely record the deed, HICV improperly recorded the deed in Plaintiff’s name.
Beginning on March 14, 2017, and as of the date of this Complaint, HICV sent at least fifty billing statements and at least three collection letters regarding Plaintiff and the Debt to FLG’s office.
In or around February 2019, Plaintiff sought a mortgage loan. She did not qualify. Plaintiff believes she will be unable to obtain a mortgage loan as long as the Debt is reported inaccurately on her Experian credit reports and in her Experian credit file.
COUNT ONE: UNLAWFUL DEBT COLLECTION PRACTICES – VIOLATION OF FLORIDA STATUTES SECTION 559.72(7)
Specifically, Plaintiff repeatedly provided notice to HICV that HICV made fraudulent misrepresentations inducing Plaintiff into the Agreement, that Plaintiff would no longer make any payments under the Agreement, that HICV failed to timely record the deed in Plaintiff’s name as required by the Agreement and therefore the Agreement was null and void, and that HICV was only entitled to retain any monies previously paid by Plaintiff to HICV as liquidated damages stipulated in the Agreement (drafted by HICV). As such, HICV knew that Plaintiff no longer owed a balance on the Debt.
COUNT FIVE: FAIR CREDIT REPORTING ACT – VIOLATION OF 15 UNITED STATES CODE, SECTION 1681e(b)
Experian willfully and/or negligently failed to establish or follow reasonable procedures to assure the maximum possible accuracy of Plaintiff’s credit reports and credit files when re-investigating Plaintiff’s disputes of the above-referenced inaccuracies contained in her Experian credit reports and credit file.
For example, despite Plaintiff’s repeated disputes of the inaccuracies in her credit reports, Experian did not request any documents from HICV supporting HICV’s reporting of the Debt. Such reporting of the Debt is false and evidences Experian’s failure to establish or follow reasonable procedures to assure the maximum possible accuracy of Plaintiff’s credit reports and credit file. Importantly, Experian possessed actual knowledge that Plaintiff did not owe a balance on the Debt from no less than three (3) disputes sent directly to Experian, which explained the rescission of the Agreement in detail, enabling Experian to easily identify that Plaintiff could not and did not owe any balance to HICV on the Debt.
COUNT EIGHT: FAIR CREDIT REPORTING ACT – VIOLATION OF 15 UNITED STATES CODE, SECTION 1681i(a)(5)
CFPB Director Rohit Chopra explains in a lecture about companies being “too big to fail/too big to jail” and “pay to play” strategies
The FTC and the CFPB Once Again Supports the Timeshare Consumer
Thank you, Irene, for explaining the upcoming Oral Arguments, scheduled for 3 October 2023, this is another in a growing list of cases against timeshare developers, a trickle at the moment, but if the way it escalated in Spain is anything to go by, then the developers are going to be in for long ride. There does appear to be a change in attitude from the courts and organisations such as the FTC and the CFPB with the consumer now taking precedence.
The industry has for too long held sway when it came to litigation, their highly paid lawyers must have spent hours researching the many laws in order to find loopholes, that automatically put the consumer at a disadvantage. The consumer needed support which was not forthcoming for whatever reasons, we believe it was the influence of the developers and their seemingly unlimited resources which “scared off” any real attempt to see a case through. That is changing, albeit slowly, organisations are now finding their own loopholes and plugging the gap, making it more likely the consumer will eventually prevail.
It is also very evident that judges are changing their attitude toward the developers, we have seen this in other reports we have published with judges refusing developers’ motions which curtail consumer’s rights. The same was true in Spain, with judges in different jurisdictions interpreting the laws differently and siding with the developers, who after all had the money and the lawyers. But eventually, they all realised that they were themselves being taken for a ride.
It was only through the tenacity of a few lawyers and some very angry consumers who refused to give in, that changed it all, with the developer’s old arguments no longer holding sway, more and more cases were being won by consumers. It was not a quick process, it took around ten years before cases became “cut & dried” with developers losing at every turn, many have just folded and gone into liquidation in order to stem the flow of cases against them. The industry in Europe is all but finished, resorts are closing and reverting to hotels, new sales are non-existent, even in-house sales (upgrades) are not what they used to be. Our question is, will the developer in the US, take note and change before the same thing happens?
That is all for this week, we hope you all have a great weekend, Baby Dog received a very yummy present, a bone from a leg of Serrano Ham, he certainly went to town on it.