Nationstar hit with lawsuit alleging payment system failed, credit misreported

But in July, the servicer’s system attempted to process her payment from the closed Bank of America account, causing it to be rejected. The bank account had been permanently shut down in May and was no longer visible in the servicer’s app, the suit says. The system requires borrowers to delete existing accounts before adding new ones, making it impossible for the old account to remain active.

Davis says she never re-authorized the defunct account. When the payment failed, she immediately contacted Nationstar and filed formal notices under the Real Estate Settlement Procedures Act detailing what had gone wrong.

The servicer acknowledged her correspondence but refused to fix the error, instead asserting without evidence that Davis had selected the closed account herself, the suit alleges. Internal logs contradicted the company’s position, as Nationstar had previously confirmed the Bank of America account was deleted in May, then later reversed course.

Within 60 days of receiving Davis’s dispute, Nationstar reported the July payment as 30 days late to credit bureaus, violating federal law that prohibits furnishing adverse information about disputed payments during the investigation window. Davis says her credit score dropped significantly, making it harder to obtain credit while causing emotional distress and reputational harm.

The case highlights persistent vulnerabilities in automated payment systems and raises questions about servicer compliance with RESPA’s error resolution requirements. Courts have held that servicers can be liable even when technical problems rather than intentional misconduct cause the failures, and that consumer protection laws should be interpreted broadly in borrowers’ favor.