Why FDCPA (and TCPA, FCRA, and TILA) Practitioners Should Read This Article
The Supreme Court’s decision in Spokeo, Inc. v. Robins, complicates Fair Debt Collection Practices Act (FDCPA) and other federal court consumer litigation. Now, in almost every case, defendants file motions challenging the consumer’s Article III standing to bring FDCPA, TCPA, FCRA, TILA, and other federal statutory claims. The extent to which Spokeo undermines FDCPA and other federal court litigation depends on the case—and on the circuit. This article summarizes the circuit decisions to date, with tips for framing and litigating cases to reduce the risks of foundering on the shoals of this murky and changing doctrine. Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).
The great majority of decisions in the first three years after Spokeo have held that consumers have standing to raise FDCPA claims. But this is not always the case, and it is essential to the successful and rapid prosecution of such claims that consumer litigants be on top of the latest Spokeo case law and strategic considerations.
This article provides a circuit-by-circuit survey of federal appellate decisions as to Spokeo’s application to FDCPA litigation. Even more detail as to circuit and district court precedent is found in the just-updated digital version of NCLC’s Fair Debt Collection § 10.4, including topic-by-topic analyses of Spokeo’s application to claims based on each of the most common FDCPA violations. Section 10.4 also examines tactical suggestions for FDCPA practitioners. Standing questions under the Fair Credit Reporting Act (FCRA), the Truth in Lending Act (TILA), and the Telephone Consumer Protection Act (TCPA) often raise similar issues and are discussed in other NCLC books: Fair Credit Reporting § 22.214.171.124; Truth in Lending § 11.2.4; and Federal Deception Law § 6.10.
What the Supreme Court Really Said
Spokeo focuses on the requirement that the plaintiff suffered an injury-in-fact in order to have Article III standing—specifically on the requirement that the injury be concrete. The Supreme Court identified two ways that an intangible injury can meet this requirement. First, an intangible injury may be concrete if it “has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.” Second, Congress “may elevat[e] to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.”
The Court also confirmed that a “risk of real harm” can be sufficient to satisfy the concreteness requirement. However, the Court cautioned that Congress’s creation of a cause of action for a violation of a statute is not necessarily sufficient to establish concreteness, and that deprivation of a “bare procedural right, divorced from any concrete harm” would not establish standing.
Circuit-by-Circuit Analysis of FDCPA Appellate Spokeo Decisions
Most Spokeo FDCPA decisions to date are from district courts. However, all of the circuits except the D.C., First, and Tenth Circuits have now issued decisions on at least some question regarding application of Spokeo to FDCPA claims. These decisions are surveyed below, circuit-by-circuit.
The Second Circuit has taken a strong pro-consumer view of standing in FDCPA cases since Spokeo. The Second Circuit held that sections 1692e (prohibiting deception) and 1692g (requiring validation of debts) protect concrete interests, so an alleged violation of these sections may demonstrate a sufficient risk of harm to the underlying interest, thereby establishing a concrete injury without the need to show additional harm. Cohen v. Rosicki, Rosicki & Assocs., P.C., 897 F.3d 75 (2d Cir. 2018).
Cohen holds that the collector’s allegedly incorrect identification of the creditor in foreclosure pleadings “might have deprived [the plaintiff] of information relevant to the debt prompting the foreclosure proceeding, posing a ‘risk of real harm’ insofar as it could hinder the exercise of his right to defend or otherwise litigate that action.” Id. at 81–82. The court concluded that this was enough to establish a concrete injury. The court declined to mix the question of materiality into the standing inquiry, holding that question relevant only for the merits inquiry. Cohen confirms the views the court expressed in two earlier unpublished decisions that the violation of FDCPA protections, at least those found in sections 1962e and 1692g, is a concrete injury in and of itself. Papetti v. Does 1-25, 691 Fed. Appx. 24 (2d Cir. 2017); Zirogiannis v. Seterus, Inc., 707 Fed. Appx. 724 (2d Cir. 2017).
A 2018 Third Circuit decision holds that a debtor had Article III standing to raise a claim that a collector violated FDCPA § 1692f(8), which prohibits using any language other than the collector’s address on an envelope, by sending the consumer a collection letter that exposed the consumer’s account number through a glassine window. St. Pierre v. Retrieval-Masters Creditors Bur., Inc., 898 F.3d 351 (3d Cir. 2018). The Third Circuit held that exposure of a debtor’s account number “‘implicates a core concern animating the FDCPA—the invasion of privacy’—and thus is closely related to harm that has traditionally been regarded as providing a basis for a lawsuit in English and American courts.” Id. at 357–358.
In 2019, the Third Circuit followed up with a decision holding that a consumer also had standing where the envelope included a visible barcode that could be scanned to reveal the consumer’s account number. DiNaples v. MRS BPO, Inc., 934 F.3d 275 (3d Cir. 2019). The Third Circuit stressed that “the disclosure of the account number is itself the harm,” and that the consumer did not have to show that someone actually intercepted their mail, scanned the barcode, and determined that the letter related to debt collection. Id. at 280.
The Fourth Circuit addressed FDCPA standing in an unreported decision. Moore v. Blibaum & Associates, P.A., 693 Fed. Appx. 205 (4th Cir. 2017). There, 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.
The court 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. This decision demonstrates the value of pleading emotional distress, but does not give much of an indication about how the court would treat a case where this sort of injury cannot be alleged.
The Fifth Circuit weighed in holding that a consumer who alleged that a collector failed to report a disputed debt as disputed had Article III standing as interpreted by Spokeo. Sayles v. Advanced Recovery System, Inc., 865 F.3d 246 (5th Cir. 2017). The consumer had not alleged any actual damages. Noting the Supreme Court’s holding that standing can be established where a statutory violation creates the risk of real harm, the Fifth Circuit held that this violation of FDCPA § 1692e(8) “exposed Sayles to a real risk of financial harm caused by an inaccurate credit rating.” Id. at 250.
The Sixth Circuit has found standing in some FDCPA cases, and a lack of standing in others. The Sixth Circuit held that debtors had Article III standing to assert a claim that a validation notice violated the FDCPA because it failed to state that the creditor was obligated to provide additional information about the creditor and the debt only if the debtor disputed the debt in writing. Macy v. GC Services Ltd. P’ship, 897 F.3d 747 (6th Cir. 2018).
Macy held that Congress enacted FDCPA § 1692g to protect debtors from abusive and deceptive debt collection practices. Giving a debtor misleading instructions about how to invoke the protections created by section 1692g created a risk of waiver of those protections, placing the plaintiffs at materially greater risk of falling victim to abusive debt collection practices. Thus, although the court treated the violation as procedural, it held that it “created a material risk of harm to a congressionally recognized interest.” Id. at 759.
Accordingly, the plaintiff did not need to allege any additional harm beyond the one Congress had identified. The Sixth Circuit stressed that the plaintiffs had alleged that the collector’s failure to mention the need for the dispute to be in writing could lead consumers to waive the important protections provided by section 1692g. It also held that the collector’s alleged policy of honoring verbal disputes went to the merits of the consumer’s claim, not his Article III standing.
Macy distinguishes two earlier Sixth Circuit decisions that found a lack of Article III standing for FDCPA claims. Lyshe v. Levy, 854 F.3d 855, 859 (6th Cir. 2017); Hagy v. Demers & Adams, 882 F.3d 616 (6th Cir. 2018).
In Lyshe v. Levy, a 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. 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 instead 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. The Lysche court stressed that the plaintiff had not suffered even this harm and had conceded that he was at no risk of doing so.
The Lyshe 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. Another ground for distinguishing Lyshe is that the risk of harm created there—the possibility that the debtor might have visited a notary or contacted the collector to obtain electronic copies of discovery requests—was not the type of harm the FDCPA was enacted to prevent.
Macy also distinguishes the Sixth Circuit’s earlier decision in Hagy v. Demers & Adams, on the ground that the plaintiffs there did not allege any risk of harm. In Hagy, a law firm sent a letter to the consumers’ lawyer, informing him that a creditor was waiving a claim that the consumers owed a deficiency. The consumers claimed that the letter violated the FDCPA because it did not identify the law firm as a collector. The Sixth Circuit held that the letter did nothing other than help the consumers. Since they did not allege that the letter caused them any harm or caused any risk of harm, the court concluded that they lacked standing.
A 2018 Seventh Circuit decision agrees with the Fifth Circuit that failure to report a disputed debt as disputed causes a concrete injury, because it causes “a real risk of financial harm caused by an inaccurate credit rating.” Evans v. Portfolio Recovery Assocs., L.L.C., 889 F.3d 337, 345 (7th Cir. 2018). The court noted that an inaccurate credit report is a “red flag” to a debtor’s other creditors and anyone who runs a background or credit check, including landlords and employers. The Seventh Circuit put great weight on the fact that in Evans the consumer’s complaint had specifically alleged the risk of concrete harm that the FDCPA violation caused for the consumer.
However, in 2019, the Seventh Circuit created a circuit split by rejecting the Sixth Circuit’s view that a collector’s failure to inform a consumer of FDCPA § 1692g’s requirement that a dispute letter be in writing creates a risk of harm that gives the consumer Article III standing. Casillas v. Madison Ave. Assocs., Inc., 926 F.3d 329 (7th Cir. 2019). The Casillas court relied heavily on a non-FDCPA decision in which it held that a plaintiff cannot satisfy the injury-in-fact element of standing simply by alleging that the defendant violated a disclosure provision of a consumer protection statute. Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017).
The Seventh Circuit distinguished the case of a disclosure that is required at the beginning of a credit arrangement and that addresses how to deal with problems that may arise in the future, which is arguably of use to all consumers. It also distinguished the case of non-disclosure of substantive information, which deprives a consumer of the opportunity to challenge it, from the failure to give the consumer a notice of statutory rights. The court also took a very narrow view of the types of informational injuries that create Article III standing, essentially limiting the Supreme Court decisions on this question to sunshine laws. See NCLC’s Fair Debt Collection § 126.96.36.199.3.
Since the Seventh Circuit held that the violation did not create standing in and of itself, the court examined the plaintiff’s particular allegations. She did not allege that she tried to dispute or verify the debt orally, that she had ever considered contacting the creditor, that she had any doubt that she owed the debt, or that she had read the notice. The court concluded that the violation amounted to the omission of information that she never would have used, so did not create a risk of harm for her.
The Casillas decision was circulated to all the judges of the Seventh Circuit to vote on whether the issue warranted plenary consideration by the en banc court. The majority of the judges voted against plenary consideration, but three judges dissented. Between the dissenting judges and the judges who decided Evans, it appears that some Seventh Circuit panels may still be prepared to take a broader view of Article III standing in FDCPA cases.
It will be important to allege facts that show that the violation placed the particular plaintiff at risk of suffering the harm the statute was intended to prevent. Cases that involve misinformation rather than non-disclosure or incomplete information may also be distinguishable. See, e.g., Untershine v. Encore Receivable Management, Inc., 2019 WL 3766564 (E.D. Wis. Aug. 9, 2019).
A final Seventh Circuit decision finds standing where the plaintiff alleged that she did not receive the validation notice at all. Lavallee v. Med-1 Solutions, L.L.C., 932 F.3d 1049 (7th Cir. 2019). The court distinguished Casillas on the ground that it merely involved an incomplete validation notice. The Lavallee court also found it likely on the facts that the consumer would have exercised her validation rights. The court cautioned that FDCPA plaintiffs should include an allegation of concrete harm in their complaints, and that a bare allegation of a violation of one of the FDCPA’s procedural requirements typically will not satisfy the injury-in-fact requirement.
In a detailed published opinion, the Eighth Circuit held that a consumer had standing to assert FDCPA claims based on two wrongful acts by a collection firm. Demarais v. Gurstel Chargo, P.A., 869 F.3d 685 (8th Cir. 2017). First, the firm filed a collection action seeking interest to which it was not entitled. It scheduled the case for trial without any evidence to present, on the assumption that the consumer would not appear and that it would obtain a default judgment. When the consumer appeared, the firm asked for a continuance. The consumer alleged that these actions amounted to an attempt to collect a debt not owed in violation of FDCPA §§ 1692e(2) and 1692f(1) and an improper threat to take action that the collector could not and did not intend to take.
The Eighth Circuit held the consumer’s allegations that he had to retain an attorney and serve discovery requests and that he spent time defending against the meritless claim amounted to concrete injuries. The court 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.”
Second, 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 Eighth Circuit 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 Ninth Circuit’s only decision so far is a short unpublished decision that affirms a dismissal of an FDCPA claim for lack of standing. Tourgeman v. Nelson & Kennard, 735 Fed. Appx. 340 (9th Cir. 2018). The claim was based on a collection letter that misidentified the creditor and contained other misrepresentations. However, although there was evidence that the letter had been mailed, the consumer had not received it. The court rejected the argument that standing was established by a risk of harm: it reasoned that since the plaintiff had never seen the letter, any inaccurate information in it did not create a risk that he would be unable to chart a proper course of action in response to the collection effort.
While the Ninth Circuit has not yet ruled on Article III standing in other FDCPA cases, it has held that consumers have standing to bring suit regarding violations of other consumer protection laws that cause emotional distress, create a risk of identity theft, or invade the consumer’s privacy. See NCLC’s Fair Debt Collection § 188.8.131.52. However, Tourgeman demonstrates the importance of avoiding bringing FDCPA cases if the particular plaintiff has unusual facts that make the risk of harm unlikely.
The first appellate FDCPA decision addressing constitutional standing after Spokeo was an unpublished opinion by the Eleventh Circuit. Church v. Accretive Health, Inc., 654 Fed. Appx. 990 (11th Cir. 2016). The Eleventh Circuit held that the complaint, which asserted a failure to give the consumer information required by FDCPA §§ 1692e(11) and 1692g, sufficiently alleged a concrete injury:
While this injury [failure to receive information to which Church was entitled] 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.
Id. at 3.
To date, Church remains the Eleventh Circuit’s only decision applying Spokeo to the FDCPA. Many courts have cited it favorably. However, since it is non-precedential, advocates in the Eleventh Circuit should be careful to appeal only cases with strong facts and well-supported claims. They should plead any harm that has occurred and any risk of harm. Although the Church court relied just on the fact that Congress elevated failure to provide disclosures to the status of a cognizable injury, advocates should also brief any analogy to traditional common law claims.
Strategic Considerations in Bringing FDCPA Cases in Light of Spokeo
Good Facts Make Good Law. Before filing an FDCPA claim, a consumer’s attorney must carefully evaluate whether the claim meets the case or controversy requirements of Article III—in particular, whether the consumer has suffered a concrete injury. Consider not only the intricacies of Spokeo and the many decisions interpreting it, but also whether the complaint smacks of something serious or something trivial. Evaluating the claims through the materiality standard that some courts have adopted may be helpful. Since the interpretation of Spokeo is still evolving, prepare and present FDCPA cases with an eye to the possibility of an appeal on standing.
Drafting the Complaint. Since Spokeo requires that an injury in fact be evident from the pleadings, take care to explain the harm or risk of harm caused by the alleged FDCPA violation in the complaint. Choosing cases in which the plaintiff’s facts demonstrate some harm or risk of harm is important even in circuits that have held that there is no need to show any additional harm besides the violation itself. Some circuits have retreated from strong opinions finding standing when faced with a case with unique facts making it very unlikely that the violation caused or threatened any harm.
Was Congress Seeking to Protect the Harm Involved? A common theme in Spokeo opinions is that courts will generally find concrete harm where the alleged injury is the type of harm that Congress was seeking to protect against in passing the statute. Any argument along these lines will be strengthened by documenting that Congress specifically intended to curb the type of harm in question when it enacted the FDCPA. If the injury alleged does not appear to be within the purposes of the statute or appears to be tangential to those purposes, courts are more likely to find that there is no concrete harm.
As noted in NCLC’s Fair Debt Collection § 184.108.40.206, many courts take the position that, because the FDCPA so clearly creates substantive rights and provides individual remedies, any violation is concrete harm in and of itself, and no further allegation of harm is necessary. This position is strongly supported by well-reasoned decisions, and advocates will often find it appropriate as one of their arguments. However, advocates should also explore carefully whether the consumer suffered some additional harm beyond experiencing the violation. Any response to a collector’s wrongful act, including a phone call, an internet search, a request for advice, or the consumer’s anxiety should be developed, and the advocate should strongly consider pleading that harm. The pleading should also specifically allege the risks of harm created by the violation.
Ask the Consumer These Questions. As part of evaluating the case, ask the questions that the defendant is likely to ask in deposition. Did the consumer receive and open the letter that was deceptive? Did the consumer read the letter? Did the consumer notice the allegedly deceptive part of the letter? Did the consumer understand that part? How did the consumer interpret it? Did that part of the letter cause the consumer any concerns or cause the consumer to take or forgo any steps, or consider taking or forgoing, any steps? Was there anything in the letter that the consumer did not understand, and did the consumer take any steps to get clarification? Does the consumer have, or did the consumer have, any disputes, doubts, or questions about the debt?
If the violation involves non-disclosure, what impact, if any, would the information have had on the consumer if it had been disclosed? Did the collector’s violations cause the consumer embarrassment, distress, worry, or fear? Did they cause the consumer to waste time? Uniformly negative answers to these questions may make it clear that the case has too many weaknesses that the defense may exploit.
Spokeo and Class Actions. In a class action, there is some danger that tying a debtor’s claim too closely to some particular harm the debtor has suffered will lead the court to conclude that the class representative’s claim is not typical of the claims of the class or that there are too many individual issues to allow class certification. Most courts hold, however, that only the class representative must establish Article III standing. See, e.g., Neale v. Volvo Cars of N. Am., L.L.C., 794 F.3d 353, 367 (3d Cir. 2015).
If a named plaintiff’s particular injuries can be presented in a way that merely illustrates the concreteness of the harm caused to that individual—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. Several courts have dismissed class actions where the named plaintiff’s particular facts made them less subject to the risk of harm than other class members might have been. See, e.g., May v. Consumer Adjustment Co., 2017 WL 227964 (E.D. Mo. Jan. 19, 2017).
Whether to Appeal. Evaluating Spokeo issues is particularly important before deciding to appeal a case. Article III standing issues can be raised sua sponte by an appellate court, so Spokeo issues are likely to arise in every appeal of an FDCPA decision. Pay especially close attention to the Spokeo decisions in your circuit, both in FDCPA case and other cases. Only appeal strong cases that present easily recognizable substantive wrongs, particularly if the circuit has not yet addressed the specific Spokeo issues that the appeal will raise. Obtain at least one second opinion from another consumer attorney about whether the case presents the Spokeo issues in a favorable light.