More Good News for FCRA Defendants – US District Court for the Western District of Washington Requires Plaintiff To Arbitrate FCRA Claims Against Loan Servicer

In Howard v. Navient Solutions, LLC, 2018 U.S. Dist. LEXIS 180022 (W.D. Wa., Oct. 18, 2018), the US District Court for the Western District of Washington recently held that arbitration provisions in promissory notes (“Notes”) signed by the plaintiff were broad enough to encompass her FCRA claim against the servicer of her student loans, Navient Solutions, LLC (“Navient”). The plaintiff opposed Navient’s motion to compel arbitration, arguing that the arbitration provisions in her Notes were not broad enough to encompass her claim that Navient failed to reasonably investigate and correct its disputed credit reporting of her student loans. Specifically, the plaintiff argued that her FCRA claim did not arise from Navient’s failure to comply with its duties under her Notes, but instead stemmed from its alleged failure to investigate and correct the credit reporting of her student loans after she disputed it. In addition, the plaintiff argued that the arbitration clause in her Notes was unconscionable because it contained a unilateral right of appeal and a class waiver provision.

The U.S. District Court disagreed, finding that the arbitration clause at issue – which provided for arbitration as to any claim that “ar[ose] from or relate[d] in any way to the Note” – was broad enough to encompass the plaintiff’s FCRA claims against Navient because its  “reporting or investigatory actions on the loans [we]re inherently related to the underlying promissory Notes.” In addition, the US District Court found that the arbitration provision at issue was not unconscionable because: (a) the plaintiff had the option of opting out of it at the time the loans were made; (b) the arbitration clause provided a mutual right of appeal; and (c) the law governing the Notes provided that class action waivers in consumer credit contracts were valid.

While the question of arbitration in a consumer case will always depend on scope of an arbitration clause and proof of a consumer’s agreement thereto, credit grantors and servicers should remember to review the agreements underlying a disputed debt in order to assess whether a debtor’s FCRA claim can be compelled to arbitration, thereby avoiding costly discovery (particularly in a multi-defendant FCRA suit) and a potential jury trial of a FCRA claim.

Ginny Barnhart

Womble Bond Dickinson (US) LLP

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