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7th Cir. Holds No Standing Without Detrimental Reliance in FDCPA Case

debt collection lettersThe U.S. Court of Appeals for the Seventh Circuit recently affirmed the dismissal of a consumer’s claims under the federal Fair Debt Collection Practices Act (FDCPA) for failing to sufficiently allege a concrete injury to confer standing under Article III.

Consistent with its string of recent decisions addressing Article III standing for claims under the FDCPA, 15 U.S.C. § 1692, et seq., the Seventh Circuit concluded that the consumer’s mere claims that a collection letter instructed her that a dispute of her debt must be in writing did not allege sufficient injury, because she did not try to show how a dispute would have benefitted her.

A copy of the opinion in Smith v. GC Services Limited Partnership is available at:  Link to Opinion.

A consumer received a letter from a debt collector that included the statement: “If you dispute this balance or the validity of this debt, please let us know in writing. If you do not dispute this debt in writing within 30 days after you receive this letter, we will assume this debt is valid.”

The consumer filed suit in federal court alleging that the letter’s instructions for a consumer to put their dispute in writing failed to comply with subsection 1692g(a)(3) of the FDCPA, arguing that a consumer is entitled to choose how to dispute a debt.  See 15 U.S.C. § 1692g(a)(3) (requiring that a debt collector send each consumer “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”).

When the case first came to the Seventh Circuit, the appellate court held that the debt collector had waived or forfeited its right to arbitration.  The trial court later dismissed the suit on remand, holding that the consumer failed to allege injury to confer Article III standing, relying principally upon Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), and Casillas v. Madison Avenue Associates, Inc., 926 F.3d 329 (7th Cir. 2019).

This appeal followed.

The Seventh Circuit noted that this appeal was stayed while it considered several other cases that presented questions about standing to sue under the FDCPA and summarized their holdings in those cases. 

After Casillas applied Spokeo’s holding that the requirement of injury as an element of standing is essential to confer standing applied to claims raised under the FDCPA, Larkin v. Finance System of Green Bay, Inc., 982 F.3d 1060 (7th Cir. 2020), and its successors in the Seventh Circuit rejected several trial judges’ distinction between “procedural” claims governed by Spokeo and Casillas to “substantive” claims — for which any asserted violation of the statute would be treated as an injury — holding that injury in fact is essential to standing in either scenario. 

Larkin and Gunn v. Thrasher, Buschmann & Voelkel, P.C., 982 F.3d 1069 (7th Cir. 2020), further held that a consumer’s assertion that she was confused by a debt collection letter does not show injury unless the confusion leads the consumer to take some detrimental step.  Although the consumer here claimed she was confused by the letter she received, she did not contend that the lack of clarity led her to take any detrimental action, and thus needed to show injury another way.

The Seventh Circuit next contrasted the consumer’s claims with those raised in Casillas, wherein the plaintiff made an argument opposite of the consumer here: that the debt collector’s failure to tell her that she had to communicate in writing caused her to lose the protections afforded under the FDCPA.  In that instance, the Court held that because Casillas did not want to communicate with the debt collector at all, the omission of details could not have harmed her — “no harm, no foul.”  926 F.3d at 331.

On appeal, the consumer attempted to distinguish Casillas on the grounds that she would have disputed the debt orally if she could have.  However, the Seventh Circuit noted that her complaint made no such assertion, and even conflicts with the trial court record wherein she replied “[W]hether [she], herself, intended to dispute the debt cannot be said at this point in the litigation” when her standing was challenged.  Thus, the Seventh Circuit reasoned that if she could not make up her mind after filing suit, she could not have had an intent to dispute the debt within 30 days of receiving the letter.

In any event, because the consumer never explained on appeal how a need to use a writing deterred her from disputing a debt (and did not claim to be illiterate), or what good a dispute would have done her, she was no worse off than if the letter had told her that she could dispute the debt orally.  Therefore, the Seventh Circuit held, the consumer did not allege any injury sufficient to confer standing.

Because the Seventh Court agreed with the trial court that the consumer lacked Article III standing, it declined to address the question whether a debt collector violates §1692g(a)(3) by telling consumers to put their disputes in writing and affirmed dismissal.

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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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