BROWNING v. TRANS UNION LLC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

NEW ALBANY DIVISION

KATHLEEN BROWNING, )

NICHOLAS FLINT COLLINS, )

)

Plaintiffs, )

)

v. ) Case No. 4:24-cv-00029-TWP-KMB

)

TRANS UNION LLC, )

EXPERIAN INFORMATION SOLUTIONS INC, )

EQUIFAX INFORMATION SERVICES LLC, )

ENVOY MORTGAGE, )

NATIONSTAR MORTAGE d/b/a MR. COOPER, )

)

Defendants. )

ORDER GRANTING IN PART AND DENYING IN PART

ENVOY MORTGAGE'S MOTION TO DISMISS

This matter is before the Court on a Motion to Dismiss filed pursuant to Federal Rule of

Civil Procedure 12(b)(6) by Defendant Envoy Mortgage LP ("Envoy") (Filing No. 41). Plaintiffs

Kathleen Browning and Nicholas Flint Collins (together, "Plaintiffs") initiated this action under

the Fair Credit Reporting Act, codified at 15 U.S.C. §§ 1681–1681x (the "FCRA"), and the Real

Estate Settlement Practices Act, codified at 12 U.S.C. §§ 2601–17 (the "RESPA"), alleging

violations of the FCRA and RESPA, breach of fiduciary duty, and negligence (Filing No. 1). Envoy

requests that the Court dismiss all of Plaintiffs' claims brought against it in their entirety and with

prejudice. For the reasons stated below, Envoy's Motion to Dismiss is granted in part and denied

in part.

I. BACKGROUND

The following facts are not necessarily objectively true, but as required when reviewing a

motion to dismiss, the Court accepts as true all factual allegations in the complaint and draws all

inferences in favor of Plaintiffs as the non-moving party. See Bielanski v. Cnty. of Kane, 550 F.3d

632, 633 (7th Cir. 2008).

On December 8, 2020, Plaintiffs purchased property located in Georgetown, Indiana (the

"Property"), to use as their primary residence (Filing No. 1 at 5). To finance the home, Plaintiffs

procured a "federally related mortgage loan," as that term is defined at 12 U.S.C. § 2602(1),

secured by a mortgage against the property (the "Loan"). Id.

Envoy was the servicer of the Loan from its origination. Then, on October 1, 2021, the

servicing of the Loan was transferred from Envoy to Defendant Nationstar Mortgage LLC

("Nationstar"). At this point, Envoy reported the Loan as 120 days past due. Plaintiffs were not

notified by Envoy that the servicing of the Loan had been transferred until December 2021. Id.

Plaintiffs paid Envoy for the Loan payments due for October 2021 and November 2021 on October

15, 2021, and November 8, 2021, respectively. Id. Then, when Plaintiffs paid Envoy for the Loan

payment due for December 2021, Envoy returned the check and advised Plaintiffs to make

payments to Nationstar, the new servicer for the Loan. In December 2021, Envoy also advised the

Plaintiffs that the payments made for October 2021 and November 2021 would be credited to their

account (Filing No. 1 at 6). However, the payments were not credited to Plaintiffs' account until

nearly a year later—October 2022 and November 2022—resulting in Nationstar reporting the

mortgage account as delinquent to one or more national credit reporting agencies ("CRAs") and

assessing late fees each month. Id.

In November 2022, Plaintiff Kathleen Browning applied to the United Services

Automobile Association for a real estate loan, only to be denied due to the adverse impact of the

late payments reported on her credit report. Then, in February 2023, Plaintiffs sent a letter to Envoy

requesting "information relating to the Loan, including payment letters, transfer notices, and an

explanation of how interest was calculated." (Filing No. 1 at 7). On April 12, 2023, Envoy admitted

to Plaintiffs that it applied the two mortgage payments for October 2021 and November 2021 to

the wrong account but was unwilling to issue refunds of interest or late fees. As of July 11, 2023,

Envoy reported the mortgage account as 120 days past due. Id.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint

that has failed to "state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When

deciding a motion to dismiss under Rule 12(b)(6), the court accepts as true all factual allegations

in the complaint and draws all inferences in favor of the plaintiff. Bielanski, 550 F.3d at 633.

However, courts "are not obliged to accept as true legal conclusions or unsupported conclusions

of fact." Hickey v. O'Bannon, 287 F.3d 656, 658 (7th Cir. 2002).

The complaint must contain a "short and plain statement of the claim showing that the

pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the Supreme

Court explained that the complaint must allege facts that are "enough to raise a right to relief above

the speculative level." 550 U.S. 544, 555 (2007). Although "detailed factual allegations" are not

required, mere "labels," "conclusions," or "formulaic recitation[s] of the elements of a cause of

action" are insufficient. Id.; see also Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 603 (7thCir.

2009) ("[I]t is not enough to give a threadbare recitation of the elements of a claim without factual

support"). The allegations must "give the defendant fair notice of what the . . . claim is and the

grounds upon which it rests." Twombly, 550 U.S. at 555. Stated differently, the complaint must

include "enough facts to state a claim to relief that is plausible on its face." Hecker v. Deere & Co.,

556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation marks omitted). To be facially plausible,

the complaint must allow "the court to draw the reasonable inference that the defendant is liable

for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550

U.S. at 556).

III. DISCUSSION

The Complaint alleges the following claims against Envoy: Count I: Breach of Fiduciary

Duty; Count II: Negligence; Count III: Violations of the RESPA; Count IV: Willful

Noncompliance with the FCRA; and Count VI: Negligent Noncompliance with the FCRA (Filing

No. 1 at 9-14). Envoy moves to dismiss Plaintiffs' claims for breach of fiduciary duty, negligence,

and violations of the RESPA and FCRA (Filing No. 43 at 6) on the grounds that Plaintiffs have

failed to state a claim for each. Envoy further urges the Court to dismiss Plaintiffs' claims in their

entirety for failure to allege compliance with the "Notice and Cure" provision of the Loan. Id. at

10. The Court will address the latter argument first and then each of Plaintiffs' claims in turn.

A. Whether Plaintiffs Fail to Allege Compliance with the Notice and Cure Provision

The Loan entered into by Plaintiffs and Envoy contains the following Notice and Cure

provision:

Neither [Plaintiffs] nor [Envoy] may commence, join, or be joined to any judicial

action (as either an individual litigant or the member of a class) that arises from the

other party's actions pursuant to this [Loan] or that alleges that the other party has

breached any provision of, or any duty owed by reason of, this [Loan], until

[Plaintiffs] or [Envoy] has notified the other party (with such notice given in

compliance with the requirements of Section 15) of such alleged breach and

afforded the other party hereto a reasonable period after the giving of such notice

to take corrective action.

(Filing No. 43 at 10 (emphasis omitted)).1 Envoy argues that Plaintiffs have failed to allege

compliance with this provision, so dismissal of the entire Complaint is warranted. Id. In response,

Plaintiffs first argue that they "requested information relating to the loan, including payment

1 "Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred

to in the plaintiff's complaint and are central to her claim." Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d

429, 431 (7th Cir. 1993) (collecting cases). Plaintiffs refer to the Loan, which is clearly central to their claims.

letters, transfer notices, and an explanation of how interest was calculated" thus satisfying this

provision (Filing No. 1 at 7). However, such requests are, at most, an inquiry into whether a breach

occurred—not a notification of breach. Requests for information and an accounting showing a

calculation of interest do not provide sufficient notice to Envoy to satisfy the requirements of the

Notice and Cure provision. See LaPointe v. U.S. Bank Nat'l Ass'n, No. 19-cv-392, 2020 U.S. Dist.

LEXIS 197636 (W.D. Mich. Oct. 23, 2020).

Second, Plaintiffs, without citing to any legal authority, assert that "lack of notice and

opportunity to cure is an affirmative defense, which must be pleaded in an answer under Fed. R.

Civ. P. 9(c), not grounds for dismissal under Rule 12(b)(6)." (Filing No. 55 at 6). Federal Rule of

Civil Procedure 9(c) provides: "[i]n pleading conditions precedent, it suffices to allege generally

that all conditions precedent have occurred or been performed. But when denying that a condition

precedent has occurred or been performed, a party must do so with particularity." Fed. R. Civ. P.

9(c).

Here, the issue before the Court on the Motion to Dismiss is not whether Envoy has

properly denied the occurrence of a condition precedent but rather, whether Plaintiffs have

properly asserted satisfaction of the condition precedent. As discussed above, the Complaint does

not "allege generally that all conditions precedent have occurred." Id. Instead, the Complaint

asserts that Plaintiffs requested information about the Loan but is devoid of any assertion that

Plaintiffs notified Envoy of a breach or issue after such request.

Third, in Plaintiffs' Response in Opposition to Envoy's Motion to Dismiss (the "Response")

Plaintiffs assert that they "made multiple efforts to resolve these issues with Envoy before filing

suit, addressing the concerns of notice." (Filing No. 55 at 6). Such assertion, if properly pled, may

be enough to satisfy Federal Rules of Civil Procedure 9(c) and survive a motion to dismiss. Fed.

R. Civ. P. 9(c). However, "[i]t is a basic principle that the complaint may not be amended by the

briefs in opposition to a motion to dismiss." Thomason v. Nachtrieb, 888 F.2d 1202, 1205 (7th Cir.

1989). Once again, the Complaint specifically states that Plaintiffs "requested information relating

to the loan, including payment letters, transfer notices, and an explanation of how interest was

calculated." (Filing No. 1 at 7). It does not, however, reference Plaintiffs' alleged "efforts to resolve

these issues with Envoy." (Filing No. 55 at 6). Thus, the Complaint has not sufficiently pled

compliance with the Notice and Cure provision.

The final question for analysis under this argument is whether Plaintiffs' failure to

sufficiently plead compliance should lead to dismissal pursuant to the Notice and Cure provision.

Envoy argues that case law supports dismissal of Plaintiffs' claims for failure to plead compliance

with the Notice and Cure provision. In support of this argument, Envoy points the Court to Milam

v. Selene Finance, LP, No. 24 C 317, 2024 U.S. Dist. LEXIS 126870 (N.D. Ill. July 18, 2024). In

Milam, the plaintiff alleged she received letters intimidating her into making payments to avoid

foreclosure in violation of the Fair Debt Collection Practices Act ("FDCPA"). Id. In enforcing a

notice and cure provision identical to the one in this case, the court in Milam concluded that the

provision covered "'any judicial action' that 'arises from' another's actions pursuant to the

mortgage." Id. at *10. The court partially rested its conclusion on the grounds that "requiring

Milam to comply with the notice and cure provision does not undermine the spirit of the FDCPA."

Id. at *13.

Envoy also points the Court to Rodriguez v. Rushmore Loan Management Services LLC,

No. 18-cv-1015, 2019 U.S. Dist. LEXIS 17202 (N.D. Ill. Feb. 4, 2019). The Rodriguez court

dismissed the plaintiff's claims on grounds that she failed to allege compliance with the notice and

cure provision, concluding that "actions that [d]efendant purportedly took pursuant to the

[m]ortgage" were subject to the notice and cure provision. Id. at *8. However, the court

distinguished between claims that arose from the FDCPA, which might survive, and claims that

arose from the mortgage, which should be dismissed. Id. at *9.

In their Response, Plaintiffs rely on Abercrombie v. Wells Fargo Bank, N.A., arguing that

"federal statutory claims are not subject to mortgage provisions that attempt to limit statutory

liability[.]" (Filing No. 55 at 6 (citing 417 F. Supp. 2d 1006, 1008 (N.D. Ill. 2006))). Plaintiffs

assert that Abercrombie does not extend to all federal statutory claims, but it does stand for the

premise that Plaintiffs' failure to comply with the Notice and Cure provision does not warrant

dismissal of their claims when doing so "would utterly defeat the central purpose of [the federal

statute]" and "effectively permit[] [Envoy] to contract its way around [the federal statute's]

requirements." Id.

Thus, whether Plaintiffs' failure to allege compliance with the Notice and Cure provision

warrants dismissal of their claims turns on whether such claims arose pursuant to the Loan or from

a federal statute and whether dismissal on these grounds would defeat the purpose of the statute.

1. Count I: Breach of Fiduciary Duty

Plaintiffs' breach of fiduciary duty claim clearly arises from the Loan. Specifically,

Plaintiffs assert that Envoy had a "duty to administer the Loan account in a manner consistent with

that of a reasonably prudent fiduciary under similar circumstances and to hold and apply their

mortgage payments correctly." (Filing No. 1 at 9). Plaintiffs do not assert a violation of a federal

statute in their breach of fiduciary duty claim. Thus, this claim clearly arises pursuant to the Loan.

Envoy's Motion to Dismiss is therefore granted as to the breach of fiduciary duty claim.

2. Count II: Negligence

Plaintiffs' negligence claim also arises from the Loan, as Plaintiffs allege the same general

duties for their negligence claim as they do for their breach of fiduciary duty claim—the duty to

apply the mortgage payments as a reasonably prudent person would. Such claims clearly arise

from Envoy's contractual duties contained in the Loan. Id. Envoy's Motion to Dismiss is granted

as to the negligence claim.

3. Count III: RESPA Claims

Plaintiffs allege multiple violations of the RESPA by Envoy—specifically, violations of 12

U.S.C. §§ 2605(b), (d), (e), and (g) (Filing No. 1 at 12). These claims arise from the RESPA rather

than from the Loan. Section 2605(b) requires notice by the transferor to the borrower of any

transfer of the mortgage, Section 2605(d) deals with the required treatment of loan payments

during a transfer period, Section 2605(e) discusses the duty of the servicer to respond to borrower

inquiries, and Section 2605(g) deals with amounts paid into escrow accounts pursuant to a

mortgage agreement. 12 U.S.C. §§ 2605(b), (d), (e), and (g). Further, the preamble of the RESPA

states:

It is the purpose of this chapter to effect certain changes in the settlement process

for residential real estate that will result -- (1) in more effective advance disclosure

to home buyers and sellers of settlement costs; (2) in the elimination of kickbacks

or referral fees that tend to increase unnecessarily the costs of certain settlement

services; (3) in a reduction in the amounts home buyers are required to place in

escrow accounts established to insure the payment of real estate taxes and

insurance; and (4) in significant reform and modernization of local recordkeeping

of land title information.

12 U.S.C. § 2601(b). The Court finds that 12 U.S.C. §§ 2605(b), (d), (e), and (g) comport with the

RESPA's central purpose, and dismissing claims pursuant to a failure to allege compliance with

the Notice and Cure provision would effectively allow Envoy to contract around the RESPA's

provisions. So, the Notice and Cure provision does not warrant dismissal of these claims.

4. Count IV: Willful Noncompliance with the FCRA

Plaintiffs allege willful violations of the FCRA, specifically, 15 U.S.C. § 1681s-2(b) (Filing

No. 1 at 13). This section of the FCRA deals with the duties of furnishers of information upon

notice of a dispute. See 15 U.S.C. § 1681s-2(b). Congress stated that the purpose of the FCRA is

to require that [CRAs] adopt reasonable procedures for meeting the needs of

commerce for consumer credit, personnel, insurance, and other information in a

manner which is fair and equitable to the consumer, with regard to the

confidentiality, accuracy, relevancy, and proper utilization of such information in

accordance with the requirements of [the FCRA].

15 U.S.C. § 1681. The duties of furnishers of information upon notice of a dispute clearly fall

within the essential purpose of the FCRA. Therefore, dismissal of Count IV pursuant to the failure

to allege compliance with the Notice and Cure provision is improper for the same reasons

discussed above.

5. Count VI: Negligent Noncompliance with the FCRA

In the alternative to their willful noncompliance claim, Plaintiffs allege negligent

noncompliance of the FCRA by Envoy (Filing No. 1 at 14). These allegations are based on the

same provision of the FCRA as Plaintiffs' willful noncompliance claim. The Court concludes above

that dismissal pursuant to the Notice and Cure provision is improper for Plaintiffs' claim of willful

noncompliance with the FCRA, and the analysis here is the same. Dismissal for the failure to allege

compliance with the Notice and Cure provision is improper.

As stated above, because Plaintiffs fail to allege compliance with the Notice and Cure

provision, dismissal is proper for Plaintiffs' breach of fiduciary duty claim and negligence claim.

However, the failure to allege compliance with the Notice and Cure provision is not grounds for

dismissal of Plaintiffs' claims under the RESPA and the FCRA. The Court will now address

whether dismissal of any claims against Envoy is warranted for failure to state a claim.

B. Count I: Breach of Fiduciary Duty

Even if Plaintiffs had properly alleged compliance with the Notice and Cure provision,

they fail to state a claim for breach of fiduciary duty. First, both parties cite cases for the well-

settled principal that in Indiana, "[m]ortgages do not transform a traditional debtor-creditor

relationship into a fiduciary relationship absent an intent by the parties to do so." Huntington

Mortg. Co. v. DeBrota, 703 N.E.2d 160, 167 (Ind. Ct. App. 1998); see Wilson v. Lincoln Fed. Sav.

Bank, 790 N.E.2d 1042, 1047 (Ind. Ct. App. 2003); see also Kreighbaum v. First Nat'l Bank, 776

N.E.2d 413 (Ind. Ct. App. 2002). However, a confidential relationship exists

whenever confidence is reposed by one party in another with resulting superiority

and influence exercised by the other. Not only must there be confidence by one

party by the other, the party reposing the confidence must also be in a position of

inequality, dependence, weakness, or lack of knowledge. Furthermore, it must be

shown that the dominant party wrongfully abused the confidence by improperly

influencing the weaker so as to obtain an unconscionable advantage.

Kreighbaum, 776 N.E.2d at 419 (quoting DeBrota, 703 N.E.2d at 167). Plaintiffs argue that such

special circumstances occurred because they placed special trust and confidence in Envoy (Filing

No. 55 at 3).

The Seventh Circuit has held that "a mortgagee owes a fiduciary duty to a mortgagor in

some narrow aspects of the relationship, such as when the mortgagor retains control of borrowed

money to pay expenses as an agent for the mortgagor, such as title insurance costs." Wigod v. Wells

Fargo Bank, N.A., 673 F.3d 547, 573 n.10 (7th Cir. 2012). Here, Plaintiffs' allegations that Envoy

improperly applied their payments to the wrong account arise solely out of the Loan. Further,

Plaintiffs' allegations do not allege that Envoy was acting as their agent at any point in time.

Plaintiffs cite Ploog v. Homeside Lending, Inc., 209 F. Supp. 2d 863 (N.D. Ill. March 18,

2002). In Ploog, the court held that a fiduciary duty may arise when the mortgagee fails to pay

taxes from an escrow account using funds made available to it by the mortgagor. Id. at 875.

However, the present case involves neither an escrow account nor a fund of money intended to be

supervised by Envoy. Plaintiffs do not allege there was ever any intent for Envoy to supervise the

payments.

Lastly, Plaintiffs allege, without citing to any legal authority, that Envoy's misapplication

of the two payments and retention of the funds for nearly a year created a constructive trust (Filing

No. 55 at 4). According to Plaintiffs, the creation of such constructive trust gives rise to a fiduciary

duty. Id. The Court is not persuaded.

"Constructive trusts are 'creatures of equity' that are 'imposed when legal title is gained

through wrongful means.'" Geels v. Flottemesch, 243 N.E.3d 1069, 1070 (Ind. 2024) (quoting

Presbytery of Ohio Valley, Inc. v. OPC, Inc., 973 N.E.2d 1099, 1109 (Ind. 2012)). "'Fraud

constitutes an essential ingredient in a constructive trust[,]' and such fraud may be 'actual or

constructive.'" Id. (quoting Hall v. Ind. Dep't of State Revenue, 351 N.E.2d 35, 38 (Ind. Ct. App.

1976) (alteration in original)). However, Federal Rule of Civil Procedure 9(b) requires that "a party

must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. Pro.

9(b). Plaintiffs do not contend that actual fraud occurred. Only constructive fraud is left. "To satisfy

this heightened pleading requirement in a constructive fraud claim under Indiana law, a plaintiff

must allege: (1) the defendant had knowledge that was not in the plaintiff's possession and (2) the

defendant improperly abused the plaintiff's confidence to obtain an unconscionable advantage."

MDG Int'l Inc. v. Australian Gold, Inc., No. 07-cv1096, 2008 U.S. Dist. LEXIS 65450 (S.D. Ind.

Aug. 22, 2008) (citing Comfax Corp v. N. Am. Van. Lines, Inc., 587 N.E.2d 118, 125 (Ind. Ct. App.

1992)). Such allegations must be set out in the complaint itself. Id. (citing Kennedy v. Venrock

Assocs., 348 F.3d 584, 593 (7th Cir. 2003)).

Plaintiffs' argument fails on both elements. The Complaint neither alleges specific

knowledge by Envoy not in Plaintiffs' possession, nor alleges an abuse of confidence. Further, the

relationship does not lend itself to an inference that Plaintiffs bestowed any confidence in Envoy

beyond performing basic contractual duties, such as applying payments to the proper account. In

the absence of constructive fraud, no constructive trust was created. For the reasons discussed

above, Plaintiffs have failed to state a claim for breach of fiduciary duty.

C. Count II: Negligence

Even if Plaintiffs had properly pled compliance with the Notice and Cure provision, they

fail to state a claim for negligence upon which relief can be granted. "To establish a claim of

negligence, a plaintiff must show: (1) that the defendant owed the plaintiff a duty, (2) that the

defendant breached that duty, and (3) that the breach proximately caused the plaintiff's injury."

Delta Tau Delta, Beta Alpha Chapter v. Johnson, 712 N.E.2d 968, 970 (Ind. 1999). Plaintiffs allege

that Envoy owed them a duty to apply the payments as a reasonably prudent person would (Filing

No. 1 at 10). In the Response, Plaintiffs cite Catalan v. GMAC Mortgage Corp., arguing that "the

Seventh Circuit has recognized that a negligence claim is appropriate where a duty arises

independently of the contract." (Filing No. 55 at 4) (citing 629 F.3d 676, 693 (7th Cir. 2011)).

However, "[u]nless there is evidence of an independent tort that would have existed if there was

no contract between the parties, they 'should not be permitted to expand that breach of contract

into a tort claim . . . by claiming negligence as the basis of the breach.'" Jaffri v. JPMorgan Chase

Bank, N.A., 26 N.E.3d 635, 638 (Ind. Ct. App. 2015) (quoting Greg Allen Constr. Co. v. Estelle,

798 N.E.2d 171, 173 (Ind. 2003)). Plaintiffs fail to cite, and the Court did not locate, any legal

authority holding that Envoy's obligation to apply the mortgage payments to the correct account

arises independently of the Loan. Rather, such an obligation appears to arise directly from, if not

entirely because of, the Loan. Plaintiffs essentially argue that Envoy negligently breached the

Loan. Such a claim is not actionable. Id. Plaintiffs therefore fail to state a claim for negligence.

D. Count III: RESPA Claims

Plaintiffs allege violations of 12 U.S.C. §§ 2605(b), (d), (e), and (g), none of which is

barred by Plaintiffs' failure to allege compliance with the Notice and Cure provision. See supra

III(A). The Court finds that Plaintiffs properly allege claims under Sections 2605(b) and (d), and

Envoy's Motion to Dismiss is denied in part as to those specific claims. However, Plaintiffs fail

to allege circumstances that warrant a claim under Sections 2605(e) and (g), and Envoy's Motion

to Dismiss is granted in part as to those specific claims.

1. Plaintiffs' Claim Under 2605(b)

Section 2605(b) of the RESPA requires "[e]ach servicer of any federally related mortgage

loan [to] notify the borrower in writing of any assignment, sale or transfer of the servicing of the

loan to any other person," with such notification being required "not less than 15 days before the

effective date of transfer." 12 U.S.C. § 2605(b)(1), (2). Plaintiffs' Complaint alleges that Envoy

"failed to notify the Plaintiffs of the assignment, sale, or transfer of the Loan within the time

permitted by law." (Filing No. 1 at 11). Envoy argues that Plaintiffs' contentions are "not plausible

given their acknowledgement that the service transfer was effective October 1, 2021," and their

omission of "any documentation or facts specifying how Envoy eventually notified Plaintiffs in

December 2021." (Filing No. 43 at 18).

In support of its argument, Envoy urges the Court to consider a letter allegedly sent to

Plaintiffs on September 13, 2021 (the "Servicing Transfer Notice") (Id.; See Filing No. 43-1 at 25-

28). "A plaintiff is under no obligation to attach to her complaint documents upon which her action

is based." Venture Assocs. Corp., 987 F.2d at 431. However, "a defendant may introduce certain

pertinent documents if the plaintiff failed to do so." Id. Such documents "are considered part of the

pleadings if they are referred to in the plaintiff's complaint and are central to her claim." Id. (citing

cases). While the Servicing Transfer Notice is clearly central to Plaintiffs' claims, Plaintiffs did not

refer to it in their Complaint. Moreover, even if the Court were to consider the Servicing Transfer

Notice, Plaintiffs allege that they were not notified of the transfer of the Loan within the time

permitted by law, which the Court must take as true for the purposes of this Motion to Dismiss.

Bielanski, 550 F.3d at 633. The Court, on a motion to dismiss, may not question the veracity of

Plaintiffs' claims pursuant to a document provided by the defendant purporting to refute such

claims. At this stage of the litigation, the Court may not conclude that Plaintiffs' claims are false

and that they did in fact receive timely notice merely because a letter sent to Plaintiffs is dated

within the statutory time frame. Such analysis is reserved for summary judgment. Because

Plaintiffs allege that they were not notified of the transfer within the statutory timeframe, the

Complaint is sufficient for this claim.

2. Plaintiffs' Claim Under 2605(d)

The Complaint asserts that Envoy "imposed late fees on the Plaintiffs regarding payments

received during the 60-day period beginning on the effective date of the servicing transfer" and

treated such payments "as late for credit reporting and other purposes in violation of 12 U.S.C. §

2605(d)." (Filing No. 1 at 11). Envoy argues that because it was not the "servicer" and did not

engage in the "servicing" of the Loan at the time of the alleged violations, Plaintiffs' claims fail,

as 2605(d) imposes "servicing" obligations on the "servicer." (Filing No. 43 at 17). The Court

disagrees.

The plain language of Section 2605(d) does not limit its applicability to only a "servicer"

or an entity that is "servicing" the Loan. Section 2605(d) states:

(d) Treatment of loan payments during transfer period. During the 60-day

period beginning on the effective date of transfer of the servicing of any federally

related mortgage loan, a late fee may not be imposed on the borrower with respect

to any payment on such loan and no such payment may be treated as late for any

other purposes, if the payment is received by the transferor servicer (rather than the

transferee servicer who should properly receive payment) before the due date

applicable to such payment.

12 U.S.C. § 2605(d). The trigger for liability under Section 2605(d) is the transfer of the servicing

of any federally related mortgage loan. The Court does not see language limiting this Section only

to actions by the "servicer." Rather this Section states that "a late fee may not be imposed on the

borrower with respect to any payment on such loan and no such payments may be treated as late

for any other purposes." Id. (emphasis added). Plaintiffs specifically allege that Envoy treated such

payments as late, stating that "as of July 11, 2023, Envoy reported the mortgage account as 120

days past due." (Filing No. 1 at 7). Moreover, Plaintiffs' allegations mirror Section 2605(d) in a

nearly identical fashion. Thus, Plaintiffs have properly alleged a claim under 12 U.S.C. § 2605(d).

3. Plaintiffs' Claim Under 2605(e)

The Complaint alleges that Envoy failed to acknowledge, respond, investigate, or correct

errors pursuant to their qualified written requests in violation of Section 2605(e) (Filing No. 1 at

11-12). While Section 2605(d) does not limit its application to only a "servicer," Section 2605(e)

does. See 12 U.S.C. § 2605(e). Section 2605(e) states in relevant part:

(e) Duty of loan servicer to respond to borrower inquiries

(1) Notice of receipt of inquiry

(A) In general. If any servicer of a federally related mortgage loan receives a

qualified written request from the borrower (or an agent of the borrower) for

information relating to the servicing of such loan, the servicer shall provide a

written response acknowledging receipt of the correspondence within 5 days

(excluding legal public holidays, Saturdays, and Sundays) unless the action

requested is taken within such period. . . .

(2) Action with respect to inquiry. Not later than 30 days (excluding legal public

holidays, Saturdays, and Sundays) after the receipt from any borrower of any

qualified written request under paragraph (1) and, if applicable, before taking any

action with respect to the inquiry of the borrower, the servicer shall [take certain

actions] . . . .

(3) Protection of credit rating. During the 60-day period beginning on the date of

the servicer's receipt from any borrower of a qualified written request relating to a

dispute regarding the borrower's payments, a servicer may not provide information

regarding any overdue payment, owed by such borrower and relating to such period

or qualified written request, to any consumer reporting agency (as such term is

defined under section 1618a of Title 15).

12 U.S.C. § 2605(e) (bold emphases in original; italics emphases added). Further, "servicer" is

defined as "the person responsible for servicing of a loan (including the person who makes or holds

a loan if such person also services the loan)." Id. § (i)(2). The term "servicing" is defined as

"receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, . .

. and making the payments of principal and interest and such other payments with respect to the

amounts received from the borrower as may be required pursuant to the terms of the loan." Id.

§ (i)(3).

Plaintiffs cite Perron v. J.P. Morgan Chase Bank, N.A., arguing that "[c]ourts have

consistently held that servicers must comply with these notice and response requirements, and

failure to do so can give rise to RESPA claims." (Filing No. 55 at 5 (citing 845 F.3d 852, 857 (7th

Cir. 2017))). While the Court does not disagree, such assertion is not at issue. Rather, the issue

before the Court is whether a transferor servicer must still comply with these notice and response

requirements over a year after the transfer of the servicing of the Loan. Said differently, the issue

is at what time is the transferor servicer relieved of its obligations imposed on servicers under the

RESPA. The Fourth Circuit has analyzed this precise question stating:

[t]he focal point of these obligations is the "effective date of transfer," or "the date

on which the mortgage loan payment . . . is first due to the transferee servicer of a

mortgage loan pursuant to the assignment, sale, or transfer of the servicing of the

mortgage loan." 12 U.S.C. § 2605(i)(1); 12 C.F.R. § 1024.2(b) (same). Before this

date, RESPA contemplates that servicing obligations thus rest with the transferor

servicer. But after this date, servicing obligations rest with the transferee servicer.

Harrel v. Freedom Mortg. Corp., 976 F.3d 434, 441 (4th Cir. 2020) (omission in original). The

Court finds the Fourth Circuit's reasoning persuasive. The duty to acknowledge, respond,

investigate, and correct errors lies with the entity servicing the Loan at the time the qualified

written request is made. This is especially true the farther from the transfer date the request is

made. The transferor servicer may not even have the capability to investigate certain issues or

correct errors after transfer because they are no longer in control of the servicing.

Here, Plaintiffs assert that Envoy failed to acknowledge, respond, investigate, or correct

errors pursuant to their February 27, 2023, letter more than a year after the transfer date of October

1, 2021. By their own Complaint, Plaintiffs knew that Envoy had ceased servicing the Loan at least

a year earlier. By this point, Envoy was relieved of its notice and response obligation under Section

2605(e). Therefore, Plaintiffs fail to state a claim under Section 2605(e).

The Court acknowledges that the transferor servicer is not immediately relieved of all

liability under Section 2605(e) as soon as the transfer is made. There may be circumstances that

still warrant liability for the transferor servicer under Section 2605(e) even after the transfer. But

as alleged in the Complaint, when the qualified written request is made more than a year after the

transfer date, and the requesting party knows the transferor servicer is no longer servicing the loan,

the notice and response requirements of Section 2605(e) will not apply, so Plaintiffs fail to state a

claim under this Section.

4. Plaintiffs' Claim Under 2605(g)

The Complaint alleges that Envoy "failed to properly apply Plaintiffs' Loan payments to

the correct account in violation of 12 U.S.C. § 2605(g)." (Filing No. 1 at 11). However, Section

2605(g) is expressly limited to escrow accounts, which are not at issue here. Section 2605(g) states:

(g) Administration of escrow accounts. If the terms of any federally related

mortgage loan require the borrower to make payments to the servicer of the loan

for deposit into an escrow account for the purpose of assuring payment of taxes,

insurance premiums, and other charges with respect to the property, the servicer

shall make payments from the escrow account for such taxes, insurance premiums,

and other charges in a timely manner as such payments become due. Any balance

in any such account that is within the servicer's control at the time the loan is paid

off shall be promptly returned to the borrower within 20 business days or credited

to a similar account for a new mortgage loan to the borrower with the same lender.

12 U.S.C. § 2605(g) (emphasis in original). Any liability resulting from Section 2605(g) is

expressly premised on the condition that "[i]f the terms of any federally related mortgage loan

require the borrower to make payments to the servicer of the loan for deposit into an escrow

account for the purpose of assuring payment of taxes, insurance premiums, and other charges with

respect to the property, . . ." Id. Plaintiffs do not allege that the Loan required payments into an

escrow account. Section 2605(g) is therefore inapplicable, and Plaintiffs fail to state a claim under

this Section.

E. Count IV: Willful Noncompliance with the FCRA

The Complaint alleges willful noncompliance with the FCRA by Envoy. Specifically,

Plaintiffs allege violations for failing to investigate the disputed information, failing to review all

relevant information provided by the CRA, and failing to block the reporting of inaccurate

information to CRAs in violation of 15 U.S.C. §§ 1681s-2(b)(1)(A), (B), and (E) (Filing No. 1 at

13). Envoy argues that "Plaintiffs do not allege that Envoy was notified of their credit disputes by

any consumer reporting agency, which is a threshold requirement to trigger furnisher liability under

15 U.S.C. § 1681s-2(b)." (Filing No. 43 at 20). However, as Plaintiffs argue, "[t]he FCRA does not

require a CRA to tell a consumer when it notifies a furnisher of information about the consumer's

dispute. As a result[,] a consumer may not, at the time of filing a complaint, be in a position to

allege that notification." Lang v. TCF Nat'l Bank, 249 F. App'x 464, 466 (7th Cir. 2007) (emphases

in original).

The Seventh Circuit has clarified its unpublished opinion in Lang stating, "[a] plaintiff

must allege that she notified a CRA and identify the CRA she notified." Freeman v. Ocwen Loan

Servicing, LLC, 113 F.4th 701, 707 (7th Cir. 2024). Plaintiffs have complied with Freeman. Id.

The Complaint states, "[o]n or about October 30, 2023, Plaintiffs, by counsel, sent a letter via U.S.

certified mail to Defendants Trans Union, Equifax, and Experian, wherein each Plaintiff disputed

the reporting of the Loan account. Specifically, Plaintiffs disputed the reporting of the late

payments on the Loan account." (Filing No. 1 at 8). Envoy may still prevail on summary judgment

if it can demonstrate that a CRA did not notify it of Plaintiffs' dispute. However, at this stage in

the litigation, Plaintiffs' recovery under the FCRA is plausible and thus the Complaint is sufficient.

Lang, 249 F. App'x at 466–67.

Envoy cites the Court's opinion in Prosser v. Capital One Bank (USA), N.A., No. 20-cv-

1117, 2021 U.S. Dist. LEXIS 243001 (S.D. Ind. December 21, 2021), arguing that Prosser

dismissed a FCRA claim, finding that even an inference that a CRA forwarded the dispute to the

furnisher does not suffice (Filing No. 43 at 20). However, the plaintiff in Prosser merely asserted

that he notified the furnisher defendants directly via email rather than asserting that he notified a

CRA. Id. at 13. Such circumstances are different than those of the case at bar. Plaintiffs in this case

expressly allege that they notified multiple CRAs specifically disputing the reporting of the late

payments and identified the CRAs as required by Freeman, 113 F.4th at 707. Such allegations are

sufficient to survive Envoy's Motion to Dismiss.

Lastly, Envoy argues that Plaintiffs' "conclusory allegations that Envoy wrongfully

reported the loan as 120 days late contemporaneously on the same date of the service transfer and

again almost two years after the service transfer of the loan 'as of July 11, 2023' are unsupported

by facts that could make those allegations plausible." (Filing No. 43 at 22). Envoy surmises that

"[i]t is the reporting of late payments by the new servicer from January 2022 to August 2022 that

Plaintiffs dispute" rather than the reporting of the misapplied payments by Envoy. Id. at 21. The

Court does not find this distinction material. Plaintiffs specifically allege that, "[a]s of July 11,

2023, Envoy reported the mortgage account as 120 days past due" and "[a]s of July 11, 2023,

Nationstar reported the account as past due from January 2022 through August 2022." (Filing No.

1 at 8). Such allegations are clearly directed at the reporting of late payments by both Envoy and

Nationstar. Therefore, the Complaint sufficiently alleges willful noncompliance with the FCRA.

F. Count VI: Negligent Noncompliance with the FCRA

In the alternative, the Complaint alleges negligent noncompliance with the FCRA by Envoy

(Filing No. 1 at 14). These allegations are based on the same failures in violation of 15 U.S.C.

§§ 1681s-2(b)(1)(A), (B), and (C) as Plaintiffs allege in Count IV. Envoy's Motion to Dismiss

treats Plaintiffs' allegations of willful and negligent noncompliance of the FCRA as one in the same

for the purposes of dismissal (See Filing No. 43 at 20-22). Even if Envoy treated the claims as

separate, their arguments would fail for the same reasons above. Therefore, the Complaint

sufficiently alleges negligent noncompliance with the FCRA.

G. Leave to Amend

Plaintiffs have requested leave to amend their Complaint (Filing No. 55 at 7). Envoy does

not contest their request but does ask the Court to dismiss Plaintiffs' negligence claims and Section

2605(d), (e) and (g) claims with prejudice (Filing No. 43 at 16-17, Filing No. 57 at 7). A district

court "should freely give leave when justice so requires." Fed. R. Civ. P. 15(a). "In the absence of

any apparent or declared reason – such as undue delay, bad faith . . . futility of amendment, etc. –

the leave sought should, as the rules require, be 'freely given.'" Foman v. Davis, 371, U.S. 178, 182

(1962). "[A] plaintiff whose original complaint has been dismissed under Rule 12(b)(6) should be

given at least one opportunity to try to amend her complaint before the entire action is dismissed."

Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 519 (7th Cir. 2015). Moreover,

"[u]nless it is certain from the face of the complaint that any amendment would be futile or

otherwise unwarranted, the district court should grant leave to amend after granting a motion to

dismiss." Barry Aviation, Inc. v. Land O'lakes Mun. Airport Comm'n, 377 F.3d 682, 687 (7th Cir.

2004). Envoy does not provide an analysis as to why granting Plaintiffs leave to amend would be

futile or otherwise unwarranted. Accordingly, Plaintiffs' request for leave to amend their original

Complaint is granted and the dismissals shall be without prejudice.

IV. CONCLUSION

For the reasons explained above, Envoy's Motion to Dismiss Plaintiffs' Complaint (Filing

No. 41) is GRANTED in part and DENIED in part. The Motion is granted as to Count I: Breach

of Fiduciary Duty; Count II: Negligence; and specific claims under Count III: RESPA, which

allege violations of 12 U.S.C. §§ 2605(e) and (g). Those claims are dismissed without prejudice.

The Motion is denied as to Count IV: Willful Noncompliance with the FCRA; Count VI: Negligent

Noncompliance with the FCRA; and specific claims under Count III: RESPA Claims, which allege

violations of 12 U.S.C. §§ 2605(b) and (d). Those claims have survived the initial hurdle of a

motion to dismiss.

Plaintiffs are granted leave to amend their Complaint, and they have 14 days from the date

of this Order to file an Amended Complaint, if doing so would not be an exercise in futility. If no

Amended Complaint is filed by the deadline, this case will proceed with the undismissed counts.

SO ORDERED.

Date: _ 2/18/2025 ( Nong atton Laat

Hon. Tanya Walton Pratt, Chief Judge

United States District Court

oo, Southern District of Indiana

Distribution:

Virginia Bell Flynn

Troutman Pepper Hamilton Sanders LLP

virginia.flynn@troutman.com

Tan Fuqua, I

Quilling, Selander, Lownds, Winslett & Moser, P.C.

ifuqua@qslwm.com

Paulina Garga-Chmiel

Dykema Gossett PLLC

pgarga@dykema.com

Caleb J. Halberg

DYKEMA GOSSETT PLLC (Chicago)

chalberg@dykema.com

Adam T. Hill

SEYFARTH SHAW LLP (Chicago)

ahill@seyfarth.com

Andrew M. Lehmann

Trans Union, LLC

andrew.lehmann@transunion.com

Steve Lozier

Troutman Pepper Hamilton Sanders LLP

stephen.lozier@troutman.com

Christopher R. Murphy

Holland & Knight LLP

Chris.Murphy@hklaw.com

Camille Renee Nicodemus

Quilling Selander Lownds Winslett Moser

cnicodemus@qslwm.com

David Sandefer

Jones Day - Chicago

dsandefer@jonesday.com

22

Heather H Sharp

Seyfarth Shaw LLP

hsharp@seyfarth.com

Joshua Stiers

Trans Union, LLC

joshua.stiers@transunion.com

Zachary L. Taylor

Winton & Hiestand Law Group PLLC

zlt@louisvillelawoffice.com