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On January 8, the U.S. District Court for the Northern District of Illinois denied a bank’s motion to dismiss claims that it had obtained a credit report without a permissible purpose, ruling that the allegations rise above a mere procedural violation of the FCRA. According to the opinion, the consumer alleged that the bank accessed her credit report and obtained personal information, including current and past addresses, birth date, employment history, and telephone numbers, without having a personal business relationship, information to suggest the consumer owed the debt, or receiving consent for the release of the report. The bank argued that the consumer’s claim was only a “bare procedural violation” and not a concrete injury in fact as required under the U.S. Supreme Court’s 2016 ruling in Spokeo v. Robins (covered by a Buckley Sandler Special Alert). However, the court determined that the consumer’s allegation that the invasion of privacy, which occurred when the bank accessed her credit report from a consumer reporting agency without receiving consent and with no legitimate business reason to do so, “adequately alleges a concrete injury sufficient to confer standing.”
On December 31, 2018, the U.S. District Court for the District of Utah granted in part and denied in part a national bank’s motion to dismiss putative class action claims concerning the bank’s use of confidential customer information to open deposit and credit card accounts as part of its incentive compensation sales program. (See previous InfoBytes coverage here.) According to the court, the plaintiffs claiming accounts were opened in their name plausibly alleged that the bank benefited from an increase in the number of accounts and products, and disagreed with the bank that the misappropriation of name claim should fail because those plaintiffs’ names and identities had value beyond those of the general public. While the majority of the state claims and all federal claims were dismissed, the court allowed four state claims to remain, including invasion of privacy. However, the court requested that the parties address why it should not decline to exercise jurisdiction over the state law claims following the dismissal of all federal claims.
Additionally, the court dismissed claims brought by “Bystander Plaintiffs” who did not allege the opening of any unauthorized accounts in their names, or claim that their information was ever improperly used or accessed or that they were subject to improper sales practices. Because the Bystander Plaintiffs claimed only that they would not have opened accounts if bank employees had told them about the alleged issues, the court dismissed their claims for lack of Article III standing, reasoning that they did not allege any injury.
On December 7, the U.S. District Court for the District of Maryland granted a motion for summary judgment filed by a real estate team and title company (defendants), finding that an alleged kickback scheme involving the defendants did not constitute a violation of RESPA, and that the plaintiffs failed to demonstrate that they suffered from any concrete harm. According to the court, the plaintiffs filed a suit on behalf of a putative class more than four and a half years after they purchased their home, claiming the defendants violated RESPA by allegedly “using a ‘sham’ marketing agreement . . . to disguise an illegal kickback scheme,” which provided the real estate team with “unearned fees” through settlement referrals to the title company. The plaintiffs further argued that they were entitled to equitable tolling because the kickback scheme was allegedly concealed in an undisclosed marketing and services agreement, and that even if the agreement had been disclosed, it would have seemingly appeared to be valid. However, the court found “no genuine issue of material fact that the [p]laintiffs failed to exercise reasonable diligence to discover their claim” because at the time of closing, “they knew that they could choose their own settlement and title company” but elected not to. In addition, the court disagreed with the plaintiffs’ argument that they had Article III standing because they were “deprived of impartial and fair competition between settlement services,” finding that the plaintiffs were not overcharged for services due to the alleged kickback scheme and failed to show that the costs of settlement services were unnecessarily increased.
Moreover, the court found that the plaintiffs (i) did not inquire about a potential relationship between the defendants; (ii) did not claim dissatisfaction with the title company services provided; and (iii) did not claim that the fees paid to the title company were “unreasonable or undeserved.” Furthermore, the court found that the claim was barred by RESPA’s one-year statute of limitations and that equitable tolling did not apply.
On December 3, the U.S. District Court for the District of New Jersey granted class certification to a group of borrowers alleging that a debt collection company misrepresented late charges accruing on student loan debt after default, in violation of the FDCPA section 1692e, among other sections. The lead plaintiff brought the action against the debt collector after receiving a letter regarding her defaulted federal Perkins student loans, which stated “[d]ue to interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater” even though the plaintiff later learned that Perkins loans cannot accrue late charges after default. After the FDCPA’s 1692e claim survived summary judgment, the plaintiff moved to certify the class, while the debt collector opposed the certification and separately moved to dismiss the class claim for lack of standing. In denying the motion to dismiss and granting certification, the court held the borrower had standing as she met the requirement of showing a concrete and particularized injury, stating “when a debt collector violates Section 1692e by providing false or misleading information, the informational injury that results—i.e., receipt of that false or misleading information—constitutes a concrete harm under Spokeo.” The court found that the borrower met the requirements for class certification, including the numerosity requirement as evidenced by the almost 3,000 letters sent by the debt collection company to New Jersey loan holders. Moreover, the court found that the class claims would predominate over individual ones since there exist common questions of law or fact insofar as class members received the same or substantially similar letters from the collector.
On September 10, the U.S. Court of Appeals for the 3rd Circuit issued a precedential order reversing in part and affirming in part a lower court’s dismissal of claims brought by three individuals who claimed a company violated the Fair Credit Reporting Act (FCRA) when it failed to provide them with copies of their consumer reports. According to the opinion, the three plaintiffs applied for jobs with the company and were ultimately not hired due to information discovered in their background checks. The plaintiffs filed a putative class action asserting the company did not send them copies of their background checks before it took adverse action when deciding not to hire them, and also failed to provide them with notices of their rights under the FCRA. The district court dismissed the claims against the company, finding there was only a “bare procedural violation,” and not a concrete injury in fact as required under the Supreme Court’s 2016 ruling in Spokeo, Inc. v. Robins (covered by a Buckley Sandler Special Alert). On appeal, the 3rd Circuit reversed the lower court’s decision, concluding that the plaintiffs had standing to assert that the company violated the FCRA by taking adverse action without first providing copies of their consumer reports. Additionally, the court noted that “taking an adverse employment action without providing the required consumer report is ‘the very harm that Congress sought to prevent, arising from prototypical conduct proscribed’ by the FCRA.” However, the appellate court affirmed the lower court’s dismissal of the plaintiffs’ claim alleging the company failed to provide them with a notice of their FCRA rights, finding that the claim was a “‘bare procedural violation, divorced from any concrete harm,’” and lacked Article III standing under Spokeo. The 3rd Circuit remanded the case for further proceedings consistent with their findings.
8th Circuit holds employee failed to plead injuries in FCRA suit against employer, law firm, and credit reporting agency
On September 6, the U.S. Court of Appeals for the 8th Circuit held that an employee lacked standing to bring claims under the Fair Credit Reporting Act (FCRA) because she failed to sufficiently plead she suffered injuries. An employee brought a lawsuit against her former employer, a law firm, and a credit reporting agency (defendants) alleging various violations of the FCRA after the employee’s credit report that was obtained as part of the hiring process background check was provided to the employee in response to her records request in a wrongful termination lawsuit she had filed. The district court dismissed the claims against the employer and the law firm and granted judgment on the pleadings for the credit reporting agency. Upon appeal, the 8th Circuit, citing the Supreme Court’s 2016 ruling in Spokeo, Inc. v. Robins (covered by a Buckley Sandler Special Alert), concluded the former employee lacked Article III standing to bring the claims. The court found that the former employee authorized her employer to obtain the credit report and failed to allege the report was used for unauthorized purposes, therefore there was no intangible injury to her privacy. Additionally, the court determined that the injuries to her “reputational harm, compromised security, and lost time” were “‘naked assertion[s]’ of reputational harm, ‘devoid of further factual enhancement.’” As for claims against the law firm and credit reporting agency, the court found that the injury was too speculative as to the alleged failures to take reasonable measures to dispose of her information. Further, whether the credit reporting agency met all of its statutory obligations to ensure the report was for a permissible purpose was irrelevant, as she suffered no injury because she provided the employer with consent to obtain her credit report.
On August 7, the U.S. Court of Appeals for the 3rd Circuit held that unpaid highway tolls are not “debts” under the FDCPA because they are not transactions primarily for a “personal, family, or household” purpose. According to the amended class action complaint at issue in the case, after a consumer’s electronic toll payment system account became delinquent, a debt collection agency sent notices containing the consumer’s account information in the viewable display of the notice envelope. The consumer filed suit alleging the collection agency violated the FDCPA. While the lower court held that the consumer had standing to bring the claim, it dismissed the action on the ground that the unpaid highway tolls fell outside the FDCPA’s definition of a debt. The 3rd Circuit affirmed the lower court’s decision. On the issue of standing, citing the Supreme Court’s 2016 ruling in Spokeo, Inc. v. Robins (covered by a Buckley Sandler Special Alert), the panel reasoned that the exposed account number “implicates a core concern animating the FDCPA—the invasion of privacy” and is a legally cognizable injury that confers standing. The panel agreed with the consumer that the obligation to pay the highway tolls arose out of a “transaction” for purposes of the FDCPA because he voluntarily chose to drive on the toll roads, but found the purpose of the transaction was “public benefit of highway maintenance and repair”—not the private benefit of a “personal, family, or household” service or good as required by the FDCPA. Moreover, the court concluded that while the consumer chose to drive on the roads for personal purposes, the money being rendered was primarily for public services, as required by the statute to collect tolls “to acquire, construct, maintain, improve, manage, repair and operate transportation projects.”
6th Circuit cites Spokeo, but holds plaintiffs alleged sufficient harm from deficient debt collection letters
On July 30, the U.S. Court of Appeals for the 6th Circuit held that consumers had standing to sue a debt collector whose letters allegedly failed to instruct them that the Fair Debt Collection Practices Act (FDCPA) makes certain debt verification information available only if the debt is disputed “in writing.” The court found that these alleged violations of the FDCPA presented sufficiently concrete harm to satisfy the “injury-in-fact” required for standing under Article III of the Constitution.
The debt collector had filed a motion to dismiss in the lower court, arguing that the putative class action plaintiffs lacked Article III standing under the Supreme Court’s 2016 ruling in Spokeo, Inc. v. Robins (covered by a Buckley Sandler Special Alert). The district court denied the motion, determining that the letters “created a ‘substantial’ risk that consumers would waive important protections afforded to them by the FDCPA” due to the insufficient instructions. The 6th Circuit affirmed. After analyzing Spokeo, the court agreed that the “purported FDCPA violations created a material risk of harm to the interests recognized by Congress in enacting the FDCPA,” namely the risk of unintentionally waiving the verification and suspension rights afforded by the FDCPA when a debt is disputed.
On February 16, the U.S. Court of Appeals for the Sixth Circuit held that a letter sent from an attorney on behalf of a mortgage servicing company to consumers violated the Fair Debt Collection Practices Act (FDCPA), but because the alleged violation did not meet the “injury in fact” requirement for standing, the consumers had no standing to sue. According to the opinion, the letter confirmed receipt of an executed warranty deed in lieu of foreclosure and reaffirmed that the mortgage servicer would “not attempt to collect any deficiency balance.” When the mortgage servicer attempted to collect the debt, the consumers cited the letter and the servicer agreed that nothing was owed. However, the consumers sued the attorney and the mortgage servicer claiming that the letter violated the FDCPA and the Ohio Consumer Sales Practices Act because it did not include a notice that it was from a debt collector. The claims against the servicer were resolved through arbitration, but a district court ruled that the attorney violated Ohio law for failing to include the appropriate disclosures. The attorney appealed, arguing that the consumers did not have standing to assert their federal and state law claims. However, citing the Supreme Court ruling in Spokeo, Inc. v. Robins, the Sixth Circuit held that the consumers must show more than a “bare procedural violation.” Even though the letter lacked the required disclosures required by the FDCPA, this lack of disclosures caused no harm to the consumers, and in fact, the “letter was good news when it arrived, and it became especially good news when [the servicer] persisted in trying to collect a no-longer-collectible debt.” Because the letter created no cognizable injury, the Sixth Circuit reversed the district court’s decision and dismissed the claims brought under the FDCPA and the Ohio Consumer Sales Practice Act for lack of standing.
On February 20, a judge for the U.S. District Court for the Northern District of Illinois denied a national insurance company’s motion to dismiss a proposed Telephone Consumer Protection Act (TCPA) class action suit brought by a California-based plumbing company. The plaintiff had sued the insurance company and one of its agents for using an autodialer to make prerecorderd sales calls. One call was answered by the plaintiff’s principal and interrupted business, which Plaintiff alleges violated the TCPA. The plaintiff also alleges that the autodialed calls “seized and trespassed upon the use of its cell phones.” In its motion to dismiss, the insurance company argued, among other things, that the plaintiff failed to allege a concrete injury, which is required to establish standing. Citing the Supreme Court ruling in Spokeo, Inc. v. Robins, the judge held that the plaintiff had alleged sufficient facts, including the disruption to its business, to establish a concrete harm.
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- Michelle L. Rogers to discuss "Preparing for servicing exams in the current regulatory environment" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
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- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
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- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
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