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Clanton v. Midland Funding, LLC

United States District Court, N.D. Illinois, Eastern Division

September 30, 2019

LORI CLANTON, Plaintiff,


          REBECCA R. PALLMEYER United States District Judge.

         Plaintiff Lori Clanton brings this case under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 eq seq. (the “FDCPA”), and the Illinois Collection Agency Act, 225 ILCS 425, et seq. (the “ICAA”), alleging that Defendants Midland Credit Management, Inc. (“MCM”) and Midland Funding, LLC (“MF”) submitted false information about Clanton's debt to a credit reporting agency. The parties have filed cross-motions for partial summary judgment. Clanton contends that Defendants' undisputed conduct violated the FDCPA, and believes that she is therefore entitled to judgment as a matter of law on the FDCPA claim. Defendants dispute that their conduct constituted an FDCPA violation, and further observe that the ICAA does not create a private right of action. As explained below, the parties' motions are granted in part and denied in part.


         I. MCM and MF

         MF characterizes itself as a "debt buyer": it purchases debt, which it then assigns to MCM for servicing and collection. (Defs.' 56.1 [56] ¶ 49.) MF holds a collection agency license from the State of Illinois, but "does not collect on the accounts that it purchases and owns," and has "no employees or interaction with any consumers." (Pl.'s 56.1 [40] ¶ 6; Ross Decl. ¶¶ 4-5, Ex. K to Defs.' 56.1.) A “Senior Group Manager” at MCM, Sandra Ross, avers that all consumer-facing activities, such as collection efforts, are performed by MCM. (Ross Decl. ¶ 5.)[1]

         MCM, and particularly its "Consumer Support Services" department, investigates and responds to consumer disputes and addresses credit reporting issues. (Defs. 56.1 ¶ 26.) MCM's "Consumer Dispute Policy" addresses identifying, investigating, recording, and responding to customer disputes. (Id. ¶ 27.) And its "Credit Bureau Reporting Policy" governs the process by which MCM relays account information to credit agencies. (Id. ¶ 28.) MCM provides copies of these polices to its employees, and trains its employees in adhering to them. (Id. ¶ 29.)

         In a sample four-month period in 2018, MCM received 152, 844 disputes on approximately 24 million accounts. (Id. ¶ 38.) MCM's Consumer Dispute Policy requires it to respond to each dispute, and communicate the dispute's existence to credit agencies, within 30 days. (Id. ¶ 24.) Upon receiving a customer dispute, MCM's first step is to update its internal records to reflect that the account is disputed. (Id. ¶ 30.) It thereafter communicates the fact that an account is disputed to credit reporting agencies through a bi-monthly process hereinafter referred to as the "Credit Reporting Cycle." (Id. ¶¶ 19-20, 33, 35.)

         MCM initiates a Credit Reporting Cycle twice each month, on the Monday following the first and third Sunday of the month. (Id. ¶ 19-20.) The process begins in the morning, when MCM automatically pulls data from its accounts, creates a list of accounts to be reported, and then adds a code to each disputed account to mark that they are, indeed, disputed. (Id. ¶ 19.) Once this process is complete, the list becomes, in MCM's characterization, "finalized." (Id.) After this step, but before MCM forwards the list to credit agencies, MCM executes "quality control checks" to ensure the data is accurate and free of duplicates. (Id. ¶ 21.) Then, on Friday of the same week, MCM sends the list to three major credit reporting agencies. (Id. ¶¶ 22, 35.) A typical list includes over 6 million unique accounts, not all of which are disputed. (Id. ¶¶ 36-37.)

         III. Plaintiff's Dispute

         In 2016, Plaintiff Lori Clanton made purchases on a credit card issued by Synchrony Bank ("Synchrony"). (Defs.' 56.1 ¶ 1.) Clanton missed payments on the card and, in doing so, incurred some amount of debt to Synchrony. (Id. ¶ 5.) On August 28, 2017, Clanton entered into a payment plan with MF to pay off this debt. (Id. ¶ 6.) The rights to Clanton's debt were assigned to MF, and her account was referred to MCM for servicing. (Defs.' Resp. Pl.'s 56.1 [56] ¶ 10.)[2]MF never contacted Clanton itself, and there is no evidence it ever reported information about Clanton's account to credit agencies. (Defs.' 56.1 ¶¶ 43-47.)

         At some point after entering into the payment plan, Clanton retained counsel. (Defs.' 56.1 ¶ 10.) On Friday, November 17, 2017, Clanton's lawyers faxed MCM a letter stating, in part, that "the debt reported on [Clanton's] credit report is not accurate." (Id.; Pl.'s 56.1 ¶ 14.) The following Wednesday, November 22, 2017, MCM processed Clanton's letter and updated its system to reflect that Clanton's debt was disputed. (Defs.' 56.1 ¶¶ 18, 50.)[3] This day fell in the middle of a Credit Reporting Cycle-two days after MCM had finalized a list, but two days before it sent that list to credit bureaus. (Id. ¶ 22.) MCM did not immediately update the list to reflect Clanton's dispute. (Id.) And on Monday, November 27, 2017, MCM communicated information regarding Clanton's alleged debt to TransUnion, a consumer reporting agency, without relaying that the debt was disputed. (Pl.'s 56.1 ¶¶ 16-17.) As of December 2, 2017, Clanton's TransUnion credit report still did not reflect that she disputed her debt. (Id. ¶ 17.) It was not until the end of the following reporting cycle, on Friday, December 8, 2017, that MCM first reported to credit bureaus that Clanton's account was disputed. (Defs.' 56.1 ¶ 23.) By this point, three weeks had passed since Clanton faxed in her dispute letter.

         In her declaration, Clanton states that as a result of the error in her TransUnion credit report, she has "suffered stress, aggravation, confusion and humiliation." (Clanton Decl. ¶ 8, Ex. B to Pl.'s 56.1.) When asked at her deposition, however, what MCM and MF did that made her "feel harmed," Clanton responded only that MCM and MF had communicated inaccurate information to her over the phone, without specifying what information was inaccurate. (Defs.' 56.1 ¶ 17; Pl.'s Dep. at 69-70, Ex. B to Defs.' 56.1.) She described her emotional distress as "stress” and a “short temper, ” which she has been experiencing for “a couple of years." (Pl.'s Dep. at 71-72.) Clanton testified that other debt collection activity, unrelated to MF and MCM, caused her to experience a short temper, as well, and stated that she could not explain the difference in stress she experienced in this case as compared to other cases. (Id. at 71-73.) No. other witness has corroborated Clanton's claim that she suffered actual damages, and it is undisputed that Clanton did not seek treatment for emotional distress in 2017. (Defs.' 56.1 ¶¶ 59-60.)

         III. Facts Related to Unclean Hands Defense

         Defendants have raised the defense of "unclean hands," and offer, as support, evidence of the conduct of Clanton's lawyers-specifically, their communications, on Clanton's behalf, of which she had no apparent knowledge: With regard to the dispute letter sent to MCM in November 2017, Clanton testified at her September 2018 deposition that she had not previously seen the letter, and did not know why her lawyers sent it. (Defs.' 56.1 ¶¶ 11-12.) Although Clanton has disputed accounts with three other debt collectors, during her deposition she did not remember when she disputed one of the accounts, and did not remember the second dispute at all. (Id. ¶ 61-62.) Clanton's lawyers sent identical dispute letters to MCM on behalf of 23 other individuals during a 10-month stretch of time, in each instance leading to a lawsuit. (Id. ¶ 16.) Clanton did not send a similar letter to Synchrony or to any credit bureau. (Id. ¶ 9.)

         When asked why she filed this lawsuit, Clanton testified only that she was following her attorney's advice. (Pl.'s Dep. at 26.) When asked what she hoped to achieve by filing the lawsuit, Clanton testified, "I don't know," then clarified that she hoped her lawyers would "have this rectified." (Id. at 27-28.) As of the date of her deposition, Clanton was not aware that her debt with MCM was ultimately marked disputed on December 8, 2017. (Defs.' 56.1 ¶ 14.)

         IV. Procedural Posture

         On December 8, 2017, Clanton filed a Complaint [1] in this court, alleging that Defendants violated the FDCPA and the ICAA. The Complaint requests actual damages pursuant to 15 U.S.C. § 1692k(a)(1), statutory damages pursuant to 15 U.S.C. § 1692k(a)(2), costs and reasonable attorneys' fees pursuant to 15 U.S.C. § 1692k(A)(3), and similar damages under the ICAA. (Complaint [1] ¶¶ 39, 41.) Neither of the Defendants moved to dismiss, and the parties proceeded with discovery. On October 29, 2018, Clanton moved for summary judgment [38] on her FDCPA claim, arguing that Defendants' undisputed conduct amounted to an FDCPA violation. On December 17, 2017, Defendants responded with their own, joint motion for summary judgment [55] on Clanton's FDCPA claim, arguing that MF's conduct is not governed by the FDCPA, that MCM's conduct does not amount to an ...

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