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What Every FDCPA Practitioner Needs to Know About Spokeo

Why Spokeo Is a Critical Consideration for FDCPA Cases

Every FDCPA practitioner needs to be aware of not only the Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 194 L. Ed. 2d 635 (2016), but also the enormous body of decisions applying it to both FDCPA and other consumer claims. While the great majority of decisions applying Spokeo to FDCPA claims have been positive so far, the area is full of dangers and pitfalls, and cases must be selected, developed, and briefed with care.

Spokeo addresses the question of when a plaintiff has Article III standing to file suit regarding a violation of a statute that did not cause any tangible injury. Since many FDCPA cases fall into this category, practitioners must be prepared for a motion to dismiss on Article III grounds in every FDCPA case. Since Article III standing goes to subject matter jurisdiction, the trial court or an appellate court can even raise it sua sponte whether or not the defendant raises it.

The first year of circuit court decisions applying Spokeo to FDCPA claims have overwhelmingly found standing. However, several of the favorable circuit-level decisions are unpublished (that is, not found in the Federal Reporter), so they do not serve as precedent for courts in that circuit, but only have persuasive value). In addition, one of the three reported decisions finds a lack of standing. Moreover, published circuit decisions on claims under other consumer statutes have been less favorable, creating a danger that they will be applied to FDCPA cases.

Since the interpretation of Spokeo is still evolving, it is essential to analyze Article III standing issues before filing any FDCPA claim, to articulate in the complaint the ways that the plaintiff has suffered a concrete injury that meets Spokeo’s criteria, and to be prepared to brief the issues vigorously. Be particularly attuned to Spokeo issues when deciding whether to appeal a trial court decision. Seven strategies to deal with Spokeo are examined toward the end of this article.

Eleventh Circuit Issued First Decision on FDCPA and Spokeo and Finds Standing

So far, six of the circuit courts have issued published or unpublished decisions applying Spokeo to FDCPA claims. All but one of the circuit decisions has found Article III standing.

The first appellate FDCPA decision addressing constitutional standing after Spokeo is the Eleventh Circuit’s unpublished decision in Church v. Accretive Health, Inc., 2016 WL 3611543 (11th Cir. July 6, 2016). The court held that the complaint, which alleged a failure to give the consumer the information required by sections 1692e(11) and 1692g, sufficiently alleged a concrete injury that met Spokeo’s standards:

The invasion of Church’s right to receive the disclosures is not hypothetical or uncertain; Church did not receive information to which she alleges she was entitled. While this injury may not have resulted in tangible economic or physical harm that courts often expect, the Supreme Court has made clear an injury need not be tangible to be concrete. See Spokeo, Inc., 578 U.S. at ---, 136 S. Ct. at 1549; Havens Realty Corp., 455 U.S. at 373. Rather, this injury is one that Congress has elevated to the status of a legally cognizable injury through the FDCPA. Accordingly, Church has sufficiently alleged that she suffered a concrete injury, and thus, satisfies the injury-in-fact requirement.

Nevertheless, the Eleventh Circuit dismissed the case, finding that the defendant was exempt under section 1692a(6)(F)(iii).

Second Circuit Finds That Any FDCPA Violation Is a Concrete Injury In and Of Itself

The Second Circuit’s first post-Spokeo decision on standing, Papetti v. Does 1-25, 2017 WL 2304227 (2d Cir. May 26, 2017), also unpublished, takes a similarly strong position—that the violation of FDCPA protections, at least those found in sections 1962e and 1692g, is a concrete injury in and of itself:

The purpose of the FDCPA is, among other things, to protect debtors from “abusive debt collection practices by debt collectors.” Section 1692g furthers that purpose by requiring a debt collector who solicits payment from a consumer to provide that consumer with “a detailed validation notice,” which allows a consumer to confirm that he owes the debt sought by the collector before paying it. And, similarly, Section 1692e protects a consumer’s ability to fully avail himself of his legal rights by prohibiting debt collectors from deceiving or misleading debtors in the course of collecting a debt. Thus, the FDCPA violations alleged by Papetti, taken as true, “entail the concrete injury necessary for standing.”

Fifth Circuit Published Decision Finds Article III Standing

The Fifth Circuit weighed in with a published, albeit brief, decision in Sayles v. Advanced Recovery System, Inc., 865 F.3d 246 (5th Cir. 2017), holding that a consumer who alleged that a collector failed to report a disputed debt as disputed had Article III standing. The consumer had not alleged any actual damages. Noting the Supreme Court’s holding in Spokeo that standing can be established where a statutory violation creates the risk of real harm, the Fifth Circuit held that this section 1692e(8) violation “exposed Sayles to a real risk of financial harm caused by an inaccurate credit rating.”

Fourth Circuit Finds Article III Standing

The Fourth Circuit addressed FDCPA standing in two unpublished decisions, Moore v. Blibaum & Associates, P.A., 2017 WL 3049521 (4th Cir. July 19, 2017), and the very similar case Ben-Davies v. Blibaum & Assocs., P.A., 2017 WL 2378920 (4th Cir. June 1, 2017). In Moore the plaintiff alleged that the collector demanded payment of an inflated amount because it had applied an improper interest rate.

The Fourth Circuit held that this was not a bare procedural violation, divorced from any concrete harm. It noted that the plaintiff had alleged that she had suffered emotional distress, anger, and frustration as a consequence of the FDCPA violations. It therefore vacated the district court decision, which had dismissed the FDCPA claim for lack of standing, and remanded the case for further proceedings. In a footnote it stated that neither a settlement offer made to the plaintiff nor her non-payment on the state court judgment were factors that should be considered in determining whether she had standing.

Eighth Circuit Issues Most Detailed FDCPA Decision Supporting Article III Standing

The most detailed decision to date finding Article III standing is the Eighth Circuit’s published opinion in Demarais v. Gurstel Chargo, P.A., --- F.3d ---, 2017 WL 3707437 (8th Cir. Aug. 29, 2017). The court held that a consumer had standing to assert FDCPA claims based on two wrongful acts by a collection firm.

First, the firm filed a collection action seeking interest to which it was not entitled. It also scheduled the case for trial without having any evidence to present, on the assumption that the consumer would not appear and that it would be able to obtain a default judgment. When the consumer appeared it asked for a continuance.

The consumer alleged that these actions amounted to an attempt to collect a debt not owed in violation of sections 1692e(2) and 1692f(1), and an improper threat to take action that the collector could not and did not intend to take. The court held the consumer’s allegations that he had to retain an attorney and serve discovery requests and that he spent time to defend against the meritless claim amounted to concrete injuries. It also held that the collector’s false representations about the amount of the debt caused a concrete injury because it created “risks of mental distress traditionally recognized in unjustifiable-litigation torts and that Congress judged sufficient for standing to sue.”

The second wrongful act was that, after dismissing the collection action with prejudice, the firm served discovery requests on the consumer, falsely stating that responses were due in thirty days, which the consumer alleged was also an attempt to collect a debt not owed. The consumer did not allege any tangible harm resulting from this communication, but the court held that being subjected to attempts to collect debts not owed has a close relationship to the harm made actionable by the common law torts of malicious prosecution, wrongful use of civil proceedings, and abuse of process. It also held that Congress had created a statutory right to be free from attempts to collect debts not owed, and that violations created the risk of mental distress, a harm that Congress identified when enacting the FDCPA.

The One Circuit Court Decision Not to Find Article III Standing in an FDCPA Case

The only circuit court decision that finds a lack of Article III standing for an FDCPA claim is the Sixth Circuit’s decision in Lyshe v. Levy, 854 F.3d 855 (6th Cir. 2017). The consumer alleged that a collection firm that had sued him failed to comply with a state procedural rule that required an electronic copy of discovery requests to be served simultaneously with the paper copy. (Instead, its cover letter when it sent the paper copy asked the debtor to contact it if he wanted a copy emailed to him or sent to him on a CD or diskette.) The consumer also alleged that the discovery requests included a blank “verification” form that falsely stated that requests for admission would be deemed admitted unless the consumer provided sworn responses.

The court rejected the position taken by other courts that receiving false information in connection with debt collection activities is a concrete harm in and of itself. It held that the complaint alleged only procedural violations, and that the potential harm of being required to visit a notary or to contact the collection firm to request an electronic copy was “not the type of harm the FDCPA was designed to prevent” (contrasting this violation with serving requests on a debtor to admit things the collector knew were not true, which would cause the type of harm the FDCPA was designed to prevent). The court stressed that the plaintiff had not suffered even this harm and had conceded that he was at no risk of doing so. The court distinguished cases in which the defendants knowingly and intentionally misrepresented facts concerning a debt, thereby suggesting that it might treat the standing issue in such a case differently.

Roadmap to Over 100 Federal Court FDCPA Decisions on Spokeo

The online version of NCLC’s Fair Debt Collection analyzes over 100 FDCPA federal court decisions dealing with Spokeo. To pinpoint analysis and relevant precedent for the violations being alleged in a particular case, use this roadmap:

  • Violations of specific FDCPA provisions regarding deception and non-disclosure, including inflation of the amount owed, misstatements to credit reporting agencies, a collector’s failure to identify itself as a debt collector, and other deceptive acts. § 6.11a.5
  • Violations of the requirements regarding the right under section 1692g to dispute a debt. § 6.11a.6
  • Contacts at inconvenient times or places. § 6.11a.7
  • Third-party contacts or public disclosure of facts about the debt. § 6.11a.8
  • Contacts with a represented debtor. § 6.11a.9
  • Conduct serving to harass, oppress, or abuse. § 6.11a.10
  • Unfair or unconscionable collection methods. § 6.11a.11
  • Lawsuits in distant forums. § 6.11a.12

Seven Essential Strategies to Deal with Spokeo Challenges

  1. Even before analyzing whether consumers in a potential FDCPA case have suffered concrete injury, evaluate whether the complaint smacks of something serious or something trivial. Bad facts make bad law.
  2. Carefully evaluate whether the consumer has suffered a concrete injury to meet Article III case or controversy requirements. Courts generally find concrete harm where the alleged FDCPA injury is the type of harm that Congress was seeking to protect in passing the statute. If the injury alleged does not appear to be within the purposes of the statute or tangential to those purposes, courts will be more likely not to find concrete harm. Applicable FDCPA precedent is set out in the online version of NCLC’s Fair Debt Collection § 6.11a.
  3. Spokeo requires that an injury in fact be evident from the pleadings. Thus it is important to allege in the complaint itself the harm caused by the FDCPA violation.
  4. A good first argument is that because the FDCPA so clearly creates substantive rights and provides individual remedies for their violation, any violation is concrete harm in and of itself, and no further allegation of harm is necessary. This position is strongly supported by many well-reasoned decisions as detailed at Id. § 6.11a.4.4.
  5. Don’t just rely on that argument. Also explore whether the consumer suffered some additional harm beyond experiencing the violation. Any response to the collector’s wrongful act, including a phone call, an Internet search, a request for advice, or anxiety, should be developed, and the advocate should strongly consider pleading that harm.
  6. In a class action, keep in mind the push-pull involved with setting out in detail the class representative’s harm and arguing that the representative’s claims are typical of those of the class and that there are not too many individual issues that would prevent class certification. Most courts hold that only the class representative must establish Article III standing. See, e.g., Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353, 367 (3d Cir. 2015); Bernal v. NRA Group, LLC, 318 F.R.D. 64, 72 (N.D. Ill. Aug. 30, 2016). See also NCLC’s Consumer Class Actions § If the named plaintiff’s particular injuries can be presented in a way that merely illustrates the concreteness of the harm caused to that individual, and not as an integral part of the claim that is asserted on behalf of the class, there will be less danger that they will interfere with class certification.
  7. Even if a FDCPA claim dismissal was not based on a Spokeo challenge, evaluate Spokeo issues before deciding to appeal a case. Article III standing issues can be raised sua sponte by an appellate court. See Fair Debt Collection § 6.11a.1. As a result, Spokeo issues are likely to arise in every appeal of an FDCPA decision. Pay especially close attention to Spokeo decisions in your circuit, both in FDCPA and other cases. Particularly if the circuit has not yet addressed the particular Spokeo issues that the appeal will raise, appeal only strong cases that present easily recognizable substantive wrongs. Before appealing, obtain at least one second opinion about whether the case presents Spokeo issues in a favorable light.

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Credit Discrimination

Consumer Class Actions

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Fair Credit Reporting

Fair Debt Collection

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