The U.S. District Court for the Western District of North Carolina found that the plaintiff was equitably estopped from pursuing a FCRA claim in light of her behavior related to the manner in which she chose to make her mortgage payments.  In Kundmueller v. Pentagon Federal Credit Union, No. 5:20-CV-00056-KDB-DSC, 2021 WL 4806733 (W.D.N.C. Oct. 14, 2021), the plaintiff borrower and her husband admitted that they had been attempting to take advantage of their mortgage lender’s credit reporting practices for late payments.  Knowing that the Defendant’s practice of reporting as late only those payments made outside the month in which they were due, Plaintiff admitted that she intentionally and regularly made late payments without any resulting negative credit reporting.  This practice continued until one of her purposely late payments was paid outside of the month and triggered a negative report to TransUnion.  The Plaintiff then raised a credit reporting dispute and filed suit.  

The Defendant moved for summary judgment on two grounds. First, that the Court lacked subject matter jurisdiction because the Plaintiff could not prove that she suffered a “concrete” injury in fact and therefore lacked standing to sue; and second, because the credit reporting was not “patently incorrect or misleading in such a way and to such an extent that it can be expected to have an adverse effect,” and therefore, it did not violate the FCRA.  2021 WL 4806733, at **3-4.

The Court disagreed with Defendant’s first argument and “assum[ed], without deciding,” that the Plaintiff had standing to pursue her FCRA claim. Id. at *4. And although the Court agreed with the Defendant’s second argument that the Plaintiff had failed to establish a FCRA violation, it is the Court’s equitable estoppel finding that is the most interesting. Id.

According to the Court, it would have been “patently unfair to allow the Plaintiff to succeed on a FCRA claim” when she “knowingly took advantage of” the Defendant’s “consistent application” of its reporting practice and policy – a practice and policy that the Plaintiff not only declined to challenge, but one which she actually embraced and attempted to leverage for her benefit.  As the Court made clear, Plaintiff “cannot eat her cake, then have it too.”  Id. at *5.

Interestingly, although the Defendant did assert equitable estoppel as one of its affirmative defenses, it did not include it as one of the grounds in support of its motion, indicating that the Court added it as an alternative basis for granting the Defendant’s motion on its own accord.

Practice Tip:  While the admissions by the Plaintiff herein may have been somewhat unique, the case does provide a good reminder of the potential value of equitable defenses.  Counsel should evaluate and assert any and all appropriate defenses, including equitable defenses, particularly when faced with similar alleged conduct.