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7th Cir. Reverses FDCPA Class Cert and Judgment Due to Lack of Standing

medical debtThe U.S. Court of Appeals for the Seventh Circuit recently vacated judgment in favor of consumers and certification of a proposed class for claims that a debt collector violated sections 1692e and 1692f of the federal Fair Debt Collection Practices Act (FDCPA) by excluding a statement that interest would accrue on the debts in their collection letters.

In so ruling, the Seventh Circuit concluded that the consumers failed to present evidence that the absence of a statement about interest influenced how they responded to the letters or managed their debts.

This, the Seventh Circuit held, did not satisfy the requirements for a plaintiff to set forth evidence of specific facts demonstrating that he or she suffered a concrete injury necessary for standing at the summary judgment stage.

A copy of the opinion in Spuhler v. State Collection Service, Inc. is available at:  Link to Opinion.

Husband and wife consumers incurred medical debts that the defendant, a debt collector, sought to collect on behalf of the medical‐care provider.  The debt collector mailed letters to the consumers providing the debts’ sums but excluding a statement that interest would accrue on the debts.

The consumers filed a putative class action complaint against the debt collector on behalf of themselves and a proposed class of all recipients of the collection letters alleging that the letters’ omissions of a statement that interest would accrue on the debts violated the FDCPA, 15 U.S.C. § 1692, et seq., by containing false, deceptive, or misleading statements in violation of § 1692e, and that the statements amounted to an unfair or unconscionable means of collecting a debt in violation of § 1692f.

The trial court entered summary judgment in the consumers’ favor and certified a class.  This appeal followed.

On appeal, the debt collector argued (1) that the consumers lacked standing to sue based on the letters’ lack of a statement about interest; (2) the consumers were otherwise not entitled to judgment as a matter of law because no statement about interest was required under the FDCPA; and (3) class certification was improper.

As a threshold issue, the Seventh Circuit discussed the consumers’ Article III standing to bring their claims in federal court. 

As you likely recall, to establish standing, a plaintiff has the burden to establish that it has “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial ruling.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016); Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561 (1992).

The debt collector argued that the consumers lacked standing for failing to allege a concrete injury-in-fact in their complaint.  However, the Seventh Circuit found this argument misplaced, as it relied upon the standard for demonstrating standing at the pleading stage which did not govern here. See Spokeo, 136 S. Ct. at 1547; Silha v. ACT, Inc., 807 F.3d 169, 173–74 (7th Cir. 2015) (A plaintiff may initially demonstrate standing by pleading allegations that “plausibly suggest” each element of standing when all reasonable inferences are drawn in the plaintiff’s favor). 

Instead, the applicable standard at the summary judgment phase requires a plaintiff to demonstrate standing by supplying evidence of “specific facts” that, taken as true, support each element of standing. Lujan, 504 U.S. at 561. 

The consumers argued on appeal that the collection letters’ failure to include a statement that the debts would accrue interest was misleading in violation of sections 1692e(2)(A) and 1692f of the FDCPA and was enough, by itself, to establish a concrete injury necessary for standing.

The Seventh Circuit noted that it recently rejected this argument in analogous contexts concerning Article III standing for claims raised under the FDCPA.  See Bazile v. Finance System of Green Bay, Inc., No. 19-1298 (7th Cir. 2020), (remanding district court’s holding that plaintiff’s satisfied requirements of Article III standing to bring FDCPA claims for findings of fact); Larkin v. Finance System of Green Bay, Inc. No. 18-3582 & 19-1537, 2020 WL 7332483 (7th Cir. Dec. 14, 2020) (affirming dismissal of claims under §§ 1692e and 1692f of the FDCPA for lack of standing where plaintiff consumer had not alleged that defendant debt collector’s omission affected her in any way, or violation caused harm or put consumer at an appreciable risk of harm). 

For a concrete injury to result from the purported FDCPA violation, the Court reasoned that the collection letters’ exclusion of a statement about accruing interest must have detrimentally affected the debtors’ handling of their debts.  See generally 15 U.S.C. §§ 1692(a), (e), 1692e. 

Here, the consumers failed to present any record evidence that the absence of the statement affected how they responded to the collection letters or managed their debts, or even took any action to seek information whether the debts were accruing interest.  

For these reasons, the Seventh Circuit concluded that the consumers’ claims were non-justiciable, as they failed to set forth evidence of specific facts demonstrating they suffered a concrete injury necessary for standing.

Accordingly, the trial court judgment in favor of the consumers and certifying a class was vacated and remanded for proceedings consistent with this opinion.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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