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Potter v. Chex Systems, Inc.

United States District Court, S.D. California

September 18, 2014

MARK POTTER, Plaintiff,
CHEX SYSTEMS, INC., Defendant.


LARRY ALAN BURNS, District Judge.

In his amended complaint, Plaintiff Mark Potter seeks damages for violations of the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq. Potter admits he overdrew his checking account with U.S. Bank in October, 2010, and that his account was later closed as a result. He then paid U.S. Bank the amount he owed, and unsuccessfully attempted to get negative information removed from his credit report. He alleges Defendant Chex Systems, Inc., a consumer reporting agency, failed to remove the negative information, and failed to respond adequately to his many letters.

Chex moved to dismiss the original complaint. Instead of opposing the motion to dismiss, Potter filed an amended complaint. Chex then moved to dismiss the amended complaint for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6).

Legal Standards

A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Under Fed.R.Civ.P. 8(a)(2), only "a short and plain statement of the claim showing that the pleader is entitled to relief, " is required, in order to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-55 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level...." Id. at 555. "[S]ome threshold of plausibility must be crossed at the outset" before a case is permitted to proceed. Id. at 558 (citation omitted). The well-pleaded facts must do more than permit the Court to infer "the mere possibility of conduct"; they must show that the pleader is entitled to relief. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

When determining whether a complaint states a claim, the Court accepts all allegations of material fact in the complaint as true and construes them in the light most favorable to the non-moving party. Cedars-Sinai Medical Center v. National League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007) (citation omitted). But the Court is "not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint, " and does "not... necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.2003) (citations and quotation marks omitted).


Potter admits he overdrew his account, and allowed it to remain overdrawn, and that after an unspecified time the bank closed it. Only after his account was closed did he pay off his debt of $577.61 to U.S. Bank. (Am. Compl., ¶¶ 12-14.) He has not alleged he had an overdraft agreement in place with U.S. Bank, or that U.S. Bank in any other way consented to allow him to maintain his account in an overdrawn state. Rather, the decision to close the account makes clear the bank thought he was acting illicitly and did not consent to it.

After the account was closed, Chex reported Potter's checking account for "Account Abuse." According to the allegations, this was an accurate report. See Steward v. Wells Fargo Bank, N.A., 2011 WL 3207037, at *6-7 (D.Minn., June 10, 2011) (where plaintiff failed to cover overdraft when requested to do so and the account was then closed, report that the account was closed for "account abuse" was true). Although Potter alleged that the report of "account abuse" was inaccurate and ought to have been removed (Am. Compl., ¶¶ 17-18, 75, 83), these allegations are conclusory and not entitled to be presumed true. See Eisberner v. Discover Prods., Inc., 921 F.Supp.2d 946, 948 (E.D. Wis. 2013) (rejecting as conclusory the assertion, unsupported by factual allegations, that describing certain accounts as "charged off" was inaccurate). Apparently, Potter seems to be arguing that paying off an account that was closed for account abuse absolves him of the abuse ( see Am. Compl., Ex. 1), which is not correct. Agencies may, and do, report violations of credit agreements even after payment is received. See, e.g., Narog v. Certegy Check Servs., Inc., 759 F.Supp.2d 1889, 1193-95 (N.D.Cal., 2011) (holding that plaintiff whose credit report showed he had a 120-day late payment on a debt he had since paid off had no cause of action under the FCRA).

The complaint, and Potter's letters (attached as exhibits) show that Potter was not disputing the fact that U.S. Bank closed his checking account after he maintained an overdraft, and that he paid off his debt only after the account was closed. What he was and is disputing is the use of "account abuse", as his letter of July 3, 2013 makes clear:

Your computers will "verify" I bank with U.S. Bank as I have many accounts with them. They will verify I have had an account closed. But you need to verify the actual information I'm disputing. I'm disputing that it is accurate to have words anything like "account abuse" related to me.

(Ex. 10 at 1-2.) But Potter's behavior can fairly be called "account abuse." The FCRA does not require that accurate negative information be removed from credit reports, even if a consumer disagrees with the language that is used to report it. See Samadi v. Bank of America, N.A., 476 Fed.Appx. 819, 823 (11th Cir. 2012).

Potter has not identified any other inaccuracy other than the "account abuse" language. He has not, for example, alleged that his report inaccurately said he had never paid off the debt. Chex says the report was updated to show Potter paid U.S. Bank what he owed ( see Am. Compl., Ex. 2), and he does not dispute this.

Potter also alleges that Chex violated its duties under § 1681e(b) by failing to adopt, implement, and follow procedures assuring the accuracy of credit reports; failing to conduct a reasonable investigation of inaccurate information within 30 days of receipt of his dispute letters; failing to delete inaccurate information; and failing to certify information as accurate before reinserting it into his credit report. Violation of certain provisions of the FCRA can ...

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