The U.S. Court of Appeals for the District of Columbia Circuit recently vacated a summary judgment order against a debtor on her claims against a debt owner and its debt collector for alleged violations of the federal Fair Debt Collection Practices Act because the debtor did not suffer a concrete injury-in-fact traceable to the alleged statutory violations and therefore lacked the required Article III standing.
A copy of the opinion in Frank v. Autovest, LLC is available at: Link to Opinion.
In May 2011, a consumer obtained financing to purchase a used car from a dealer. The dealer immediately assigned its interest in the borrower’s financing agreement to an automobile finance company. The borrower defaulted on the financing agreement and voluntarily surrendered her car to the finance company.
The debt owner subsequently acquired the debt from the finance company. The debt owner retained a debt collector which sent two letters to the debtor indicating that the debt owner had purchased the debt and requiring that the debtor make all future payments to the debt collector.
The debt collector sued the debtor in the Superior Court for the District of Columbia to collect the debt. The complaint attached a sworn “Verification of Complaint” and the debt collector’s counsel later filed affidavits in support of their fees and costs, including documenting that their fees were contingent upon recovery. The Superior Court initially defaulted the debtor, but later vacated the default after the debtor filed a motion and paid a $20 fee.
After the debtor retained counsel, the debt collector dismissed its case against the borrower with prejudice.
The debtor then filed a putative class action in federal court against the debt owner and debt collector alleging that the affidavits filed in support of the debt collection suit contained “false, deceptive, or misleading representations” in violation of 15 U.S.C. section 1692e of the FDCPA, that the affidavits were designed to “harass, oppress, or abuse” the debtor in violation of section 1692d, and that this “unfair or unconscionable” debt-collection practice violated the FDCPA under section 1692f. The debtor also claimed that the debt collector violated all these provisions of the FDCPA “by attempting to collect contractually unauthorized contingency fees.”
The debtor testified at her deposition that she “was being scammed” in the debt collection suit because she had “never heard” of the debt collector. The debtor admitted that she did not take any action or “refrain from doing anything” because of the affidavits. She also admitted she did not make any payments to the debt collector because of the affidavits.
The federal trial court granted the debt owner and debt collector’s motions for summary judgment finding that any misstatements in the affidavits were not actionable because they were immaterial and did not affect the borrower’s “ability to respond or to dispute the debt.”
This appeal followed.
Although the trial court did not examine the debtor’s standing, the D.C. Circuit began its analysis by evaluating standing because it has “an independent obligation to assure that standing exists.” Article III requires that a plaintiff have “a concrete and particularized injury-in-fact traceable to the defendant’s conduct and redressable by a favorable judicial order” for standing to exist. When opposing summary judgment, a “plaintiff must demonstrate standing by affidavit or other evidence.”
Here, the D.C. Circuit held that the debtor failed to meet her burden because she did not “identify a concrete personal injury traceable to the false representations” in the affidavits. To the contrary, her testimony established “that she neither took nor failed to take any action because of these statements.” She also did not testify that the affidavits “confused, misled, or harmed” her.
Although the debtor claimed that the lawsuit stressed and inconvenienced her, the debtor “never connected those general harms to the affidavits,” as required to confer Article III standing on her alleged FDCPA claims.
The D.C. Circuit rejected the debtor’s argument that the “court costs and attorney’s fees” that she incurred in defense of the suit were sufficient to establish standing because “the record contains no evidence linking these expenses to the alleged statutory violations.”
The debtor also argued that she suffered an informational injury sufficient to establish standing because the debt collector and the debt owner denied her “access to truthful information.” To demonstrate a cognizable informational injury a plaintiff must prove that she “1) has been deprived of information that, on her interpretation, a statute requires a third party to disclose, and (2) suffers, by being denied access to that information, the type of harm Congress sought to prevent by requiring disclosure.”
Here, the D.C. Circuit determined that the borrower could not satisfy the second requirement because her testimony established no “detrimental reliance—or any other harm—based on the misrepresentations in the . . . affidavits.”
The debtor also argued that her claims were the type of injuries that Congress “sought to curb” with the FDCPA and that the FDCPA authorizes a private right of action. Thus, the debtor claimed that she did not have to prove “any additional harm.”
However, as you may recall, in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Supreme Court made it clear that even for a statutory violation, “Article III standing requires a concrete injury.” Although Congress may identify and elevate an intangible harm, this “does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Nowhere does the FDCPA state “that every violation of the provisions implicated here—no matter how immaterial the infraction— creates a cognizable injury.”
The D.C. Circuit held that simply pointing to alleged false statements in the affidavits is not enough to establish standing because “not all inaccuracies cause harm or present any material risk of harm.” Although a misrepresentation in a debt collector’s affidavit filed in court could cause a borrower to suffer “a concrete and particularized injury,” that was not the case here. Thus, even if the debt collector and debt owner violated the FDCPA, the borrower lacked Article III standing.
Finally, the D.C. Circuit examined the debtor’s argument that her subjective response to the affidavits was immaterial, because the proper inquiry is the “affidavits’ likely effect on a hypothetical unsophisticated debtor.”
The Court rejected this argument because it confused “standing with the merits.” Although the “unsophisticated consumer (or in some courts, the least sophisticated consumer)” is the correct substantive standard that courts use to evaluate the borrower’s FDCPA claims, this does not relieve a consumer from the threshold requirement “to establish Article III standing—including a concrete and particularized injury-in-fact.” This is because, as broad as Congress’s powers are to “to define and create injuries,” Congress “cannot override constitutional limits.”
Thus, the D.C. Circuit vacated the trial court’s summary judgment order and remanded the case to be dismissed for lack of jurisdiction.