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Deceptive And Unconscionable Acts And Their Relationship To The Fair Credit Reporting Act

A Jefferson County, Texas couple purchased a home in Port Neches, Texas in 2002. They signed a typical mortgage agreement with a local bank. The mortgage was then sold to Compass Bank.

At some point, the plaintiffs fell behind in their mortgage payments. Compass Bank notified them of the delinquency in 2013. That year, the couple and Compass Bank entered into a loan modification agreement. Four months later, however, the bank alleged the homeowners were still in default.

The couple sued Compass in 2015, asking for more than a million dollars and an injunction. Plaintiffs alleged Compass Bank had misrepresented the terms of the 2013 agreement; breached the agreement; and engaged in deceptive trade practices.

After nearly three years of litigation, a jury rendered a verdict.

The jurors found Compass Bank failed to comply with the 2013 agreement and awarded the couple $72,995.45 in compensation. The jury also found Compass Bank engaged in deceptive acts and unconscionable actions. Jurors also found Compass acted knowingly and awarded the couple $105,000. A total of $185,000.00 was also awarded as attorney's fees, which includes representation if Compass Bank appeals to the Texas Supreme Court.


The jury awarded the plaintiffs $4,000 each for their past mental anguish, but declined to award them damages for their future mental anguish or for past and future damage to their credit score. "JC jury hits Compass Bank with $370K verdict, half of amount awarded as attorney's fees," www.setexasrecord.com (Oct. 15, 2018).


Commentary

The jury awarded damages for attorney’s fees, breach of contract, and deceptive acts by the bank. However, the award could have been much higher.

In this case, the jury declined to award the plaintiffs damages for, among other things, injuries to their credit score. It should be noted that even though, in this instance, a damaged credit report was not considered an element of damages, it very well could be.

When evaluating a potential claim or exposure to liability arising from a financial institution’s breach, damage to a credit score should be one of the factors that is part of any decision. Given the ubiquity of credit and the increasing number of entities that rely on credit scores to assess consumers, renters, or purchasers, large verdicts with elements of damages arising from credit scores should not be overlooked. Set aside, for the moment, the pure financial impact of bad credit, such as the higher interest rates or higher insurance premiums that flow from low scores. A jury hearing of damage to a consumer’s financial reputation could return a verdict to compensate the plaintiff consumer who has been deprived of the ability to obtain the most basic services or perform the most routine of consumer transactions, such as renting an apartment or hotel room, or opening a bank account.

Although the Fair Credit Reporting Act (FCRA), 15 U.S.C. §1681 et seq. and case law interpreting the Act provide guidance, the damage to credit reputation is well-recognized outside of the Act. The U.S. Supreme Court has recognized that the concept of actual damages or actual injury embraces a far broader scope of harm than just direct pecuniary loss, and can include loss of reputation in the community, personal humiliation, and mental anguish and suffering.

For example, in 2005, the U.S. Sixth Circuit affirmed a judgment that included compensatory damages for lost credit and mortgage opportunities and damage to plaintiff’s reputation for creditworthiness, and the Third Circuit has also held credit denial letters were sufficient proof of actual damages to defeat a summary judgment.

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