District Court Shows Timeshare ‘Exit’ Lawyer Exit | K&L Gates LLP

In May 2022, a New Jersey District Court ruled in favor of Diamond Resorts, refusing to hold them liable under the Fair Credit Reporting Act. The Esperance v. Diamond Resorts provides insight into how courts interpret the Fair Credit Reporting Act. Specifically, the court ruled that companies providing consumer information to credit bureaus, such as Diamond Resorts, do not have to investigate the legal validity of debts. This reduces a company’s obligation to investigate under the Act only to disputed factual inaccuracies. Additionally, the court found that the Fair Credit Reporting Act does not in itself impose any ramifications on businesses that report inconsistent credit information.


  • District Court Grants Diamond Resorts Motion for Summary Judgment on All Claims
  • Companies providing consumer information to credit bureaus do not have to investigate the legal validity of debts
  • No ramifications for inconsistent credit reports under the Fair Credit Reporting Act


Sandy Esperance and Betsy Fumelus (the plaintiffs) were sisters who purchased a timeshare in Florida from defendant Diamond Resorts’ predecessor, Tempus Palms International. After several years of repaying their loans, the plaintiffs hired Mr. Mitchell Sussman (Sussman) to get out of their timeshare obligations. Sussman is a California attorney who specializes in “freeing timeshare owners from their timeshare obligations” and has come under fire in the courts for his questionable timeshare exit practices.

In this case, Sussman sent a letter to Diamond Resorts stating that the claimants would no longer pay for their timeshare. Four months later, Sussman sent the applicants a congratulatory letter, informing them that they were no longer timeshare owners and were no longer responsible for payments. Attached to the congratulatory letter was a quitclaim in lieu of foreclosure, which would have transferred title to the timeshare to Diamond Resorts.

On Sussman’s advice, the plaintiffs stopped paying Diamond Resorts even though there was no evidence that Diamond Resorts ever contacted Sussman or agreed to cancel the plaintiffs’ timeshare. Diamond Resorts – a “credit provider” under the Fair Credit Reporting Act (the Act) because it reports consumer credit information to credit reporting agencies such as Experian Information Solutions, LLC (Experian ) – continued to comply with its obligations by reporting applicants in default accounts to the credit bureaus.

Dissatisfied that timeshare obligations continued to be reported to Experian, among others, plaintiffs filed five credit disputes alleging inaccuracies in their reports. Relying on the information and waiver provided to them by Sussman, the plaintiffs alleged that their Diamond Resorts accounts were in fact “closed.” Diamond Resorts’ credit reporting team conducted a thorough investigation of the five disputes. In response to each, Diamond Resorts verified that the accounts were open and instructed Experian to reduce the claimants’ accounts to reflect only the principal balances due.

After being unable to remove the timeshare bonds from their credit reports, the plaintiffs filed suit against Diamond Resorts and Experian in the United States District Court for the District of New Jersey (the Court), alleging violations of the law. Plaintiffs claimed that both defendants reported inaccurate information regarding the status and balance of plaintiffs’ accounts.


In granting Diamond Resorts’ motion for summary judgment, the Court held that companies that provide consumer credit information to credit bureaus (credit information providers) are not required to investigate the legal validity of disputed debts. This decision follows several other federal circuit and district cases.1

The Court explained that when a consumer disputes information on their credit report, a credit information provider should reasonably investigate the accuracy of the information they provided. However, a credit information provider will only be liable for failure to investigate or for conducting an improper investigation if the information reported is found to be inaccurate or materially misleading.

The Court dismissed the allegation that Diamond Resorts provided inaccurate information to Experian when, despite the waiver, it reported that the claimants’ accounts were open. In agreement with Diamond Resorts, the court limited the company’s obligations under the law by requiring it to investigate disputes only factual inaccuracies. Thus, a plaintiff invoking the Act cannot argue that his credit report is inaccurate because he is not legally liable for the debts (a question of law rather than a question of fact). The Court found that Diamond Resorts was not liable under the Act because the basis of Plaintiffs’ dispute, as to whether the Quitclaim Deed was valid and sufficient to terminate Plaintiffs’ loan obligations, was a legal issue. Therefore, Diamond Resorts was under no obligation to investigate the legal validity of the waiver obtained by Sussman.

The Court further dismissed the plaintiffs’ claim that Diamond Resorts provided inaccurate information when reporting fluctuating balances to Experian. Although the Court found that Diamond Resorts reported inconsistent balances, the Court held that these discrepancies did not constitute liability under the Act. As long as the information was not misleading, the court said, a credit information provider is not required “to report in any way, including charges and interest on capital balance or not”.

Finally, in rejecting Plaintiffs’ argument that it was incorrect to report Plaintiffs’ account as open and undebited, the Court held that Diamond Resorts was not legally bound to debit Plaintiffs’ accounts. Although Diamond Resorts’ SEC filings provided that it billed accounts 180 days past due, no law binds Diamond Resorts to its delisting procedures contained in its SEC filings.

On this basis, the Court held that as a matter of law, Diamond Resorts was entitled to summary judgment.


Duties under the Act

By law, a credit information provider must reasonably investigate the factual accuracy of disputed information. For example, whether a plaintiff was charged for the disputed services is a factual question. However, a credit information provider is not required to resolve legal issues, such as the legal validity of the underlying debt. When determining whether the basis of a dispute falls outside the investigative functions of the Act, credit information providers must determine whether the underlying issue is a factual or legal issue.

Liability under the Act

Although credit information providers should strive to provide consistent information, this case shows that inconsistently providing consumer information in a way that is not misleading is unlikely to attract liability under the Law.

When reporting consumer information to credit bureaus, the law imposes no liability on a credit information provider who reports an account as open despite the fact that the account is eligible for a dump. Charging an account is not legally required, even if the company’s subsidiary regulatory documents authorize charging the account.

1 Chiang v. Verizon New England, 595 F.3d 26, 35 (1st Cir. 2010); Hunter c. JPMorgan Chase Bank, Nat’l Ass’n, 770 F. App’x 452, 458 (11th Cir. 2019); Herrell c. Chase Bank USA, NA, 218 F. Supp. 3d 788, 793 (ED Wisconsin 2016); Alston v. Wells Fargo Home Mortg., No. 13-3147, 2016 WL 816733, at *10 (D. Md. February 26, 2016).

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