The U.S. Court of Appeals for the Seventh Circuit recently affirmed the dismissal of consumers’ claims that a collection letter used false, deceptive, or misleading representations, or otherwise unfair or unconscionable methods to collect a debt, in supposed violation of sections 1692e and 1692f of the federal Fair Debt Collection Practices Act (FDCPA).
Affirming the trial court’s judgment on different grounds, the Seventh Circuit concluded that the bare procedural violation alleged by the letters’ recipients failed to satisfy the “injury-in-fact” requirement to confer standing under Article III, as the consumers’ complaint did not allege that the purported FDCPA violations injured them in any concrete way, tangible or intangible.
A copy of the opinion in Larkin and Sandri v. Finance System of Green Bay is available at: Link to Opinion.
In March 2017, a debt collector sent a dunning letter to a consumer regarding debt related to medical services. The letter included the statement “You want to be worthy of the faith put in you by your creditor … . We are interested in you preserving a good credit rating with the above creditor.”
In August and September 2017, another consumer received three similar dunning letters from the debt collector, which, respectively, included the following statements: (1) “Your creditor is interested in you preserving a good credit rating with them”; (2) “You do not want to lose our confidence. You want to be worthy of the faith put in you by your creditor …” and; (3) “Your creditor has placed your bill for collection. To avoid errors and to clear your credit record with the above creditor, send or bring your payment to our office, or pay online … .”
Consumer 1 and consumer 2, both represented by the same law firm, filed nearly identical class-action lawsuits against the debt collector alleging that the collection letters 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 amount to an unfair or unconscionable means of collecting a debt in violation of § 1692f.
The debt collector moved to dismiss the consumers’ complaints, arguing that the complaint was untimely and failed to state a claim, challenging the consumers’ standings. The trial court judge concluded that the consumers had standing and timely filed suit but dismissed the complaints for failing to state a claim, holding as a matter of law that the statements within the collection letters did not violate §§ 1692e or 1692f.
The consumers appealed, and the Seventh Circuit consolidated the cases because they presented identical questions of law.
On appeal, the Seventh Circuit initially 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, 136 S. Ct. at 1547.
Many disputes about standing — including this one — turn on the “injury in fact” requirement: that a plaintiff must demonstrate that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Id. at 1548 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)).
The Seventh Circuit further noted that particularization is generally easy to understand — that it must “affect the plaintiff in a personal and individual way.” Lujan, 504 U.S. at 560 n.1; however, the concrete requirement can be trickier, as a concrete injury must be “real ,.. not abstract,” but not necessarily tangible. Spokeo, 136 S. Ct. at 1548-49. In the context of a statutory violation, the injury-in-fact requirement of Article III is not satisfied for a “bare procedural violation” of a statute when the plaintiff has not alleged a concrete personal violation form the violation. Id.
To analyze whether the consumers met this threshold, the Seventh Circuit turned to recent rulings applying Article III standing analysis to violations of section § 1692g of the FDCPA.
In Casillas v. Madison Avenue Associates, 926 F. 3d 329 (7th Cir. 2019), the plaintiff alleged that a collection letter violated section 1692g of the FDCPA by failing to inform her that if she wished to exercise her right to dispute the debt or demand verification of the creditor’s identity, she had to do so “in writing” as § 1692g(a)(4) requires. There, the Court concluded that because the consumer did not allege any injury or concrete harm by receiving a letter with an incomplete validation notice, that she lacked standing to sue. Casillas, 926 F. 3d. at 339.
However, in Lavallee v. Med-1 Solutions, 932 F. 3d 1049 (7th Cir. 2019), the collection letter received by the plaintiff did not provide any of the disclosures required by section § 1692g(a), which resulted in actual harm to the plaintiff from the statutory violation in that the debt collector sued her in state court to collect the outstanding debt. Lavallee, 932 F.3d at 1053. Because the plaintiff in Lavallee alleged that she “would have exercised her statutory rights [to dispute the debt and demand verification], thereby halting the collection litigation” if the debt collector had complied with its FDCPA notice obligations, the appellate court concluded that the plaintiff adequately pleaded a concrete injury to confer Article III standing.
Turning back to the case at bar, the Seventh Circuit concluded that the consumers only generally alleged that certain statements in the collection letters were false, deceptive, or misleading, or unfair and unconscionable, but neither complaint alleged harm — or even an appreciable risk of harm — from the claimed statutory violation.
Although the consumers attempted to distinguish Casillas by arguing that their claims were raised under sections §§ 1692e and 1692f of the FDCPA, while Casillas alleged violations of section 1692g, the Seventh Circuit was not persuaded that the distinction made Casillas inapplicable or altered the Article III calculus.
Because the consumers failed to allege that the debt collector’s FDCPA violation injured them in any concrete way as required under Article III, the Seventh Circuit concluded that their suits should have been dismissed for lack of standing.
Accordingly, the Court modified the judgments to reflect a jurisdictional dismissal and affirmed the trial court’s judgment as modified.