On January 30, 2018, Judge Hayes of the Southern District federal court denied Citizens Bank’s motion to dismiss our inaccurate credit reporting claims. Based on California Civil Code 580b, when a lender decides to foreclose on a home instead of pursuing the borrower for financial damages, and if the mortgage was undertaken for the purpose of purchasing the house, then the lender cannot pursue the borrower for any deficiency between what is left of the balance of the loan after foreclosure sale. This is known in California as the “one bite” rule—the lender only gets “one bite” at the apple in pursuing recourse for the default.
Judge Hayes agreed with our allegations that, because the lender cannot pursue the borrower for any deficiency owed on the balance of the loan, then the lender also cannot report that deficiency upon the borrower’s credit reports. In this case, Judge Hayes found that Citizens Bank had reported false, inaccurate, and misleading information, because Citizens Bank had been reporting on our client’s credit reports that he still owed a significant balance upon the loan after the foreclosure sale, which created the misleading impression that our client was still in default upon the account even though our client had no liability at all upon the account after the Bank chose to proceed with a foreclosure sale.
You can read a copy of the ruling by clicking HERE.