• Nevada Court Finds Accelerator Clause in Auto Loan Agreement Allowed Furnisher to Demand Full Payment and Report Adverse Information to the Credit Reporting Agencies
  • July 28, 2010 | Author: Paul W. Sheldon
  • Law Firm: Strasburger & Price, LLP - Frisco Office
  • Woodson v. Capital One Auto Finance, Inc.,  2010 U.S. Dist. LEXIS 66218 (D. Nev. July 1, 2010)

    Facts:  Plaintiff brought suit against Defendant Capital One Auto Loans (“Capital One”) for allegedly reporting false and inaccurate information to the CRAs and failing to investigate a disputed claim brought to the CRAs regarding an adverse Capital One account.  Specifically, Plaintiff’s automobile financed through Capital One became stolen and the amount owed on the vehicle was more than what the insurance proceeds paid out. After months of Capital One’s unsuccessful attempts at obtaining the remaining amount owed by Plaintiff, Capital One began reporting to the CRAs that Plaintiff was late on her payments and that Defendant had charged off the loan as bad debt. Plaintiff alleged violations of § 1681n and § 1681o under the FCRA. Capital One’s Motion for Summary Judgment was subsequently granted. 

    • Willful Violation. Section 1681n imposes civil liability under the FCRA upon any person who “willfully fails to comply” with any requirement of section 1681 et seq. The Ninth Circuit has held that “a company is liable for a willful violation of FCRA if it ‘knowingly and intentionally committed an act in conscious disregard for the rights of others.”
    • Negligent Violation. Section 1681o imposes civil liability upon any person “who is negligent in failing to comply” with any requirement of 1681 et seq., but damages are limited to any actual damages as well as costs and fees.
    • Compliance Under Underlying Agreement.  An accelerator clause between Plaintiff and Capital One allowed Capital One to demand immediate payment of the loan balance if Plaintiff breached any obligation in the auto loan agreement. Plaintiff breached that agreement when she could no longer provide a security interest in the vehicle due to it being stolen.
    • Furnisher Duties. Because Plaintiff did not pay on the remainder of the loan, Capital One did not act in conscious disregard for the rights of Plaintiff when it reported Plaintiff’s activities to creditors. Likewise, because Plaintiff failed to pay the balance on her loan, Capital One did not willfully or negligently fail to comply with the requirements of § 1681s-2(b) when it reported Plaintiff’s activities to credit agencies.