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  • Supreme Court blocks student debt relief program

    Courts

    On June 30, the U.S. Supreme Court issued a 6-3 decision in Biden v. Nebraska, striking down the Department of Education’s (DOE) student loan debt relief program (announced in August and covered by InfoBytes here) that would have provided between $10,000 and $20,000 in debt cancellation to certain qualifying federal student loan borrowers making under $125,000 a year.

    The Biden administration appealed an injunction entered by the U.S. Court of Appeals for the Eighth Circuit that temporarily prohibited the Secretary of Education from discharging any federal loans under the agency’s program. (Covered by InfoBytes here.) Arguing that the universal injunction was overbroad, the administration contended that the six states lack standing because the debt relief plan “does not require respondents to do anything, forbid them from doing anything, or harm them in any other way.” Moreover, the secretary was acting within the bounds of the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) when he put together the debt relief plan, the administration claimed.

    In considering whether the secretary has authority under the HEROES Act “to depart from the existing provisions of the Education Act and establish a student loan forgiveness program that will cancel about $430 billion in debt principal and affect nearly all borrowers,” the Court majority (opinion delivered by Chief Justice Roberts, in which Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett joined) held that at least one state, Missouri, had Article III standing to challenge the program because it would cost the Missouri Higher Education Loan Authority (MOHELA), a nonprofit government corporation created by the state to participate in the student loan market, roughly $44 million a year in fees. “The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself,” the Court wrote.

    The Court also ruled in favor of the respondents on the merits, noting that the text of the HEROES Act does not authorize the secretary’s loan forgiveness plan. While the statute allows the Secretary to “waive or modify” existing statutory or regulatory provisions applicable to student financial assistance programs under the Education Act in connection with a war or other military operation or national emergency, it does not permit the Secretary to rewrite that statute, the Court explained, adding that the “modifications” challenged in this case create a “novel and fundamentally different loan forgiveness program.” As such, the Court concluded that “the HEROES Act provides no authorization for the [s]ecretary’s plan when examined using the ordinary tools of statutory interpretation—let alone ‘clear congressional authorization’ for such a program.”

    In dissent, three of the justices argued that the majority’s overreach applies to standing as well as to the merits. The states have no personal stake in the loan forgiveness program, the justices argued, calling them “classic ideological plaintiffs.” While the HEROES Act bounds the secretary’s authority, “within that bounded area, Congress gave discretion to the [s]ecretary” by providing that he “could ‘waive or modify any statutory or regulatory provision’ applying to federal student-loan programs, including provisions relating to loan repayment and forgiveness. And in so doing, he could replace the old provisions with new ‘terms and conditions,”’ the justices wrote, adding that the secretary could provide whatever relief needed that he deemed most appropriate.

    The Court also handed down a decision in Department of Education v. Brown, ruling that the Court lacks jurisdiction to address the merits of the case as the respondents lacked Article III standing because they failed to establish that any injury they may have suffered from not having their loans forgiven is fairly traceable to the program. Respondents in this case are individuals whose loans are ineligible for debt forgiveness under the plan. The respondents challenged whether the student debt relief program violated the Administrative Procedure Act’s notice-and-comment rulemaking procedures as they were not given the opportunity to provide feedback. (Covered by InfoBytes here.)

    President Biden expressed his disappointment following the rulings, but announced new actions are forthcoming to provide debt relief to student borrowers. (See DOE fact sheet here.) The first is a rulemaking initiative “aimed at opening an alternative path to debt relief for as many working and middle-class borrowers as possible, using the Secretary’s authority under the Higher Education Act.” The administration also announced an income-driven repayment plan—the Saving on a Valuable Education (SAVE) plan—which will, among other things, cut borrowers’ monthly payments in half (from 10 to 5 percent of discretionary income) and forgive loan balances after 10 years of payments rather than 20 years for borrowers with original loan balances of $12,000 or less.

    Courts Federal Issues State Issues U.S. Supreme Court Biden Consumer Finance Student Lending Debt Relief Department of Education HEROES Act Administrative Procedure Act Appellate Eighth Circuit

  • 8th Circuit reverses debt collection action for lack of standing

    Courts

    On February 24, the U.S. Court of Appeals for the Eighth Circuit vacated and remanded the dismissal of a class action lawsuit concerning a medical collection letter that listed amounts due but did not distinguish between the principal and the interest that the debt collectors were attempting to charge. Plaintiff, who never paid any part of the interest or principal, filed a class action against the defendant debt collectors alleging violations of the FDCPA and the Nebraska Consumer Practices Act (NCPA). The defendants moved for summary judgment, arguing that the plaintiff lacked Article III standing. The district court denied the motion and the jury found for the defendants on all counts except for the NCPA claim, which was not tried before a jury. After trial, the district court determined it had provided improper jury instructions, and sua sponte, entered judgment for the plaintiff as a matter of law on both the NCPA and FDCPA claims. The district court specifically ruled that the NCPA does not allow collection of prejudgment interest by a debt collector without an actual judgment. The defendants appealed.

    On appeal, the 8th Circuit focused on whether the plaintiff had standing. The appellate court held that the collection letter did not cause the plaintiff concrete harm, and concluded (quoting TransUnion LLC v. Ramirez, citing Spokeo, Inc. v. Robins) that without a concrete injury in fact, she “is ‘not seeking to remedy any harm to herself but instead is merely seeking to ensure a defendant’s compliance with regulatory law (and, of course, to obtain some money via the statutory damages).’” Without suffering a tangible harm, the appellate court said it could only recognize injuries with “a ‘close relationship’ to harm ‘traditionally’ recognized as providing a basis for a lawsuit in American courts.” The plaintiff pointed to fraudulent misrepresentation and conversion as analogous to her alleged injury, but the appellate court disagreed and determined that the consumer could not establish injury sufficient to satisfy Article III standing. In vacating and remanding the district court’s ruling, the 8th Circuit pointed out that, absent standing, it lacked jurisdiction to decide any other issues raised on appeal.

    Courts Appellate Debt Collection Consumer Finance Eighth Circuit FDCPA Class Action State Issues Nebraska

  • 8th Circuit affirms almost $20 million in damages and attorney’s fees in RMBS action

    Courts

    On February 2, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court order requiring a mortgage lender to pay $5.4 million in damages and $14 million in attorney’s fees for selling mortgages that did not meet agreed-upon contractual representations and warranties to a now-defunct company that packaged and resold the loans to residential mortgage-back securities (RMBS) trusts. The now-defunct company was sued by the RMBS trusts after loans underlying the securitizations began defaulting at a high rate during the 2008 financial crisis. A liquidating trust was established to oversee wind-down measures after the company filed for bankruptcy. The liquidating trust later began suing originators for indemnification over the allegedly defective mortgages. In 2020, the district court ruled in favor of the liquidating trust and entered judgment for $5.4 million in damages, $10.6 million in attorney’s fees, $3.5 million is costs, $2 million in prejudgment interest, and $520,212 in “post-award prejudgment interest.” The district court found, among other things, that the lender had breached its client contracts, and that in doing so, contributed to the now-defunct company’s “losses, damages, or liabilities within the scope of the contractual indemnity.” The court also found the liquidating trust’s damages methodology to be reasonable and nonspeculative. The lender appealed, disagreeing with how the underlying contracts were interpreted, as well as the allocation of multi-party damages and the post-trial award of fees, costs, and interest.

    On appeal, the 8th Circuit disagreed, concluding that the terms of the parties’ contract made the lender liable. The appellate court also rejected the lender’s contention that it should not be expected to pay the claims against the now-defunct company because they were extinguished in bankruptcy, and that the methodology used to calculate the damages was inaccurate. In awarding $5.4 million in indemnification damages, the appellate court held that the district court properly found that the expert’s “‘calculation of damages was reasonable and non-speculative,’ and that his methodology produced a reasonably certain measure of [the liquidating trust’s] indemnifiable damages.” The 8th Circuit further concluded that the fee award was fair and that the district court had accounted for the complexity of the case and the importance of conducting a detailed loan-by-loan analysis. The appellate court also accused the lender of relitigating already decided issues and driving up the costs. However, the 8th Circuit did order the district court to recalculate the post-judgment interest award using guidance under 28 U.S.C. § 1961(a) rather than the 10 percent prejudgment interest rate under Minnesota law.

    Courts Appellate Eighth Circuit Mortgages RMBS Settlement Attorney Fees Interest

  • States file brief in support of Biden’s student loan debt-relief program

    Courts

    On January 11, a coalition of 22 state attorneys general from Massachusetts, California, Colorado, Connecticut, Delaware, the District Of Columbia, Hawaii, Illinois, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and Wisconsin, filed an amicus brief with the U.S. Supreme Court in two pending actions concerning challenges to the Department of Education’s student loan debt relief program. At the beginning of December, the Supreme Court agreed to hear the Biden administration’s appeal of an injunction entered by the U.S. Court of Appeals for the Eighth Circuit that temporarily prohibits the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan (covered by InfoBytes here). In a brief unsigned order, the Supreme Court deferred the Biden administration’s application to vacate, pending oral argument. Shortly after, the Supreme Court also granted a petition for certiorari in a challenge currently pending before the U.S. Court of Appeals for the Fifth Circuit, announcing it will consider whether the respondents (individuals whose loans are ineligible for debt forgiveness under the plan) have Article III standing to bring the challenge, as well as whether the Department of Education’s debt relief plan is “statutorily authorized” and “adopted in a procedurally proper manner” (covered by InfoBytes here). Oral arguments in both cases are scheduled for February 28.

    The states first pointed out that under the Higher Education Act, Congress gave the Secretary “broad authority both to determine borrowers’ loan repayment obligations and to modify or discharge these obligations in myriad circumstances.” The Secretary was also later granted statutory authority under the HEROES Act to take action in times of national emergency, which includes allowing “the Secretary to ‘waive or modify any statutory or regulatory provision applicable to the student financial assistance programs’ if the Secretary ‘deems’ such actions ‘necessary’ to ensure that borrowers affected by a national emergency ‘are not placed in a worse position financially’ with respect to their student loans.” The states stressed that while “the magnitude of the national emergency necessitating this relief is unprecedented, the relief offered to borrowers falls squarely within the authority Congress gave the Secretary to address such emergencies and is similar in kind to relief granted pursuant to other important federal student loan policies that have concomitantly advanced our state interests.”

    The states went on to explain that the Secretary tailored the limited debt relief using income thresholds to ensure that “the borrowers at greatest risk of pandemic-related defaults receive critical relief, either by eliminating their loan obligations or reducing them to a more manageable level,” thus meeting the express goal of the HEROES Act to “prevent[] affected borrowers from being placed in a worse position because of a national emergency.” The states also stressed that the Secretary reasonably concluded that targeted relief is necessary to address the impending rise in pandemic-related defaults once repayment restarts. The HEROES Act expressly permits the Secretary to “exercise his modification and waiver authority ‘notwithstanding any other provision of law, unless enacted with specific reference to [20 U.S.C. § 1098bb(a)(1)],” the states asserted, noting that “relevant statutory and regulatory provisions related to student loan repayment and cancellation contain no such express limiting language.”

    Secretary Miguel Cardona issued the following statement in response to the filing of more than a dozen amicus curiae briefs: “The broad array of organizations and experts—representing diverse communities and different perspectives—supporting our case before the Supreme Court today reflects the strength of our legal positions versus the fundamentally flawed lawsuits aimed at denying millions of working and middle-class borrowers debt relief.” A summary of the briefs can be accessed here.

    Courts State Issues State Attorney General Department of Education Student Lending Debt Relief Consumer Finance U.S. Supreme Court Biden Covid-19 HEROES Act Higher Education Act Appellate Fifth Circuit Eighth Circuit

  • Supreme Court agrees to hear second appeal over student debt relief plan

    Courts

    On December 12, the U.S. Supreme Court granted a petition for certiorari in a student debt relief challenge currently pending before the U.S. Court of Appeals for the Fifth Circuit. As previously covered by InfoBytes, the DOJ filed an application on behalf of the Department of Education (DOE) asking the U.S. Supreme Court to stay a judgment entered by the U.S. District Court for the Northern District of Texas concerning whether the agency’s student debt relief plan violated the Administrative Procedure Act’s (APA) notice-and-comment rulemaking procedures. In a brief unsigned order, the Supreme Court deferred the DOE’s application for a stay, pending oral argument. The Supreme Court said it will treat the application as a “petition for a writ of certiorari before judgment,” and announced a briefing schedule will be established to allow the case to be argued in the February 2023 argument session to resolve the legality of the program. Oral arguments are scheduled for February 28, 2023.

    The Supreme Court said it will consider whether the respondents (individuals whose loans are ineligible for debt forgiveness under the plan, as covered by InfoBytes here) have Article III standing to bring the challenge. The Supreme Court will also consider whether the DOE’s plan is “statutorily authorized” and “adopted in a procedurally proper manner.”

    This is the second case concerning the Biden administration’s student debt relief plan that the Supreme Court has agreed to hear. On December 1, the Supreme Court agreed to hear the Biden administration’s appeal of an injunction entered by the U.S. Court of Appeals for the Eighth Circuit, which temporarily prohibits the Secretary of Education from discharging any federal loans under the DOE’s student debt relief plan. (Covered by InfoBytes here.)

    Courts Department of Education Consumer Finance Student Lending Debt Relief U.S. Supreme Court Appellate Fifth Circuit Eighth Circuit DOJ HEROES Act Administrative Procedure Act

  • Supreme Court asked to stay judgment holding that HEROES Act does not authorize the creation of the DOE’s student debt relief plan

    Courts

    Recently, the DOJ filed an application on behalf of the Department of Education (DOE) asking the U.S. Supreme Court to stay a judgment entered by the U.S. District Court for the Northern District of Texas in an action related to whether the agency’s student debt relief plan violated the Administrative Procedure Act’s (APA) notice-and-comment rulemaking procedures. As previously covered by InfoBytes, the district court held that while the HEROES Act expressly exempts the APA’s notice-and-comment obligations, the district court stressed that the HEROES Act “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program,” and, moreover, does not mention loan forgiveness. On December 1, the U.S. Court of Appeals for the Fifth Circuit denied the DOE’s motion for stay pending appeal.

    In its application, the DOE argued that the plaintiffs never asserted that the debt relief plan exceeded the education secretary’s statutory authority. Instead, the DOE argued, the plaintiffs alleged only that they were improperly denied the opportunity to comment on the plan, stressing that while the district court recognized that the HEROES Act expressly exempts the APA’s notice-and-comment obligations, it went further by holding that the plan went beyond the secretary’s authority. “The district court profoundly erred by raising and deciding a claim that respondents did not assert and could not have asserted,” the DOE stressed, further adding that the plaintiffs did not claim that providing debt relief to other borrowers would inflict injury on them. Beyond this, the secretary’s plan “falls squarely within the plain text of his statutory authority,” the DOE asserted. The DOE requested that the Supreme Court stay the district court’s judgment, or in the alternative, defer the application pending oral argument and treat it as a petition for certiorari before judgment, grant the petition, and hear the case along with a second separate action, discussed below, involving a challenge to an injunction that temporarily prohibits the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan.

    As previously covered by InfoBytes, on December 1, the Supreme Court agreed to hear the Biden administration’s appeal of an injunction entered by the U.S. Court of Appeals for the Eighth Circuit. The 8th Circuit held that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose,” and pointed to the fact that the collection of student loan payments and the accrual of interest have both been suspended. (Covered by InfoBytes here.) The 8th Circuit’s opinion followed a ruling issued by the U.S. District Court for the Eastern District of Missouri, which dismissed an action filed by state attorneys general from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina for lack of Article III standing after concluding that the states—which attempted “to assert a threat of imminent harm in the form of lost tax revenue in the future”— failed to establish imminent and non-speculative harm sufficient to confer standing. In an unsigned order, the Supreme Court deferred the Biden administration’s application to vacate, pending oral argument. Oral arguments are scheduled for February 28, 2023.

    Courts Student Lending DOJ Department of Education Administrative Procedure Act Debt Relief Consumer Finance U.S. Supreme Court Appellate Fifth Circuit Eighth Circuit HEROES Act

  • Supreme Court to fast-track review of student debt relief program

    Courts

    On December 1, the U.S. Supreme Court agreed to hear the Biden administration’s appeal of an injunction entered by the U.S. Court of Appeals for the Eighth Circuit that temporarily prohibits the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan (announced in August and covered by InfoBytes here). In a brief unsigned order, the Supreme Court deferred the Biden administration’s application to vacate, pending oral argument. The Supreme Court said it will treat the Biden administration’s application as a “petition for a writ of certiorari before judgment,” and announced a briefing schedule will be established to allow the case to be argued in the February 2023 argument session to resolve the legality of the program.

    The Biden administration filed its application last month asking the Supreme Court to vacate, or at minimum narrow, the 8th Circuit’s injunction. Among other things, the Biden administration claimed that the 8th Circuit failed to “analyze the merits of the respondents’ claims, much less determine they are likely to succeed” when it granted an emergency motion for injunction pending appeal filed by state attorney generals from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina. As previously covered by InfoBytes, the 8th Circuit determined that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose,” and pointed to the fact that the collection of student loan payments and the accrual of interest have both been suspended.

    The appellate court’s “erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” the Biden administration said, adding that if the Supreme Court “declines to vacate the injunction, it may wish to construe this application as a petition for a writ of certiorari before judgment, grant the petition, and set the case for expedited briefing and argument this Term to avoid prolonging this uncertainty for the millions of affected borrowers.”

    In its application, the Biden administration argued that the universal injunction was overbroad. The application further argued that the states lack standing because the debt relief plan “does not require respondents to do anything, forbid them from doing anything, or harm them in any other way.” Moreover, the Secretary of Education was acting within the bounds of the HEROES Act when he put together the debt relief plan, the application contended. “The COVID-19 pandemic is a ‘national emergency declared by the President of the United States,’” the application said. “Both the Trump and Biden Administrations previously invoked the HEROES Act to categorically suspend payments and interest accrual on all Department-held loans in light of the pandemic.” The application further argued that the states “have not disputed that those actions were lawful,” and that the Secretary of Education “reasonably ‘deem[ed]’ relief ‘necessary to ensure’ that a subset of these affected individuals—namely, those with lower incomes—‘are not placed in a worse position’ in relation to their student-loan obligations ‘because of their status as affected individuals.’”

    Meanwhile, on December 1, the 5th Circuit denied the Department of Education’s (DOE) opposed motion for stay pending appeal, following a ruling issued by the U.S. District Court for the Northern District of Texas related to whether the agency’s student debt relief plan violated the Administrative Procedure Act’s (APA) notice-and-comment rulemaking procedures. As previously covered by InfoBytes, the district court determined that while the HEROES Act expressly exempts the APA’s notice-and-comment obligations, the court stressed that the HEROES Act “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program,” and, moreover, does not mention loan forgiveness.

    Earlier, on November 22, the Department of Education (DOE) extended the pause on student loan repayments, interest, and collections in an effort to alleviate uncertainty for borrowers. Saying “it would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay,” the DOE stated that payments will resume 60 days after it is allowed to implement the debt relief plan or the litigation is resolved, explaining that this will give the Supreme Court time to resolve the case during its current term. However, if the debt relief plan has not been implemented and litigation has not been resolved by June 30, 2023, borrowers’ payments will resume 60 days after that, the DOE explained.

    Courts Student Lending Department of Education HEROES Act Appellate Eighth Circuit Biden U.S. Supreme Court Covid-19 Consumer Finance Fifth Circuit

  • 8th Circuit pauses student debt relief program

    Courts

    On November 14, the U.S. Court of Appeals for the Eighth Circuit granted an emergency motion for injunction pending appeal filed by state attorneys general from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina to temporarily prohibit the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan (announced in August and covered by InfoBytes here). Earlier in October, the 8th Circuit issued an order granting an emergency motion filed by the states, which requested an administrative stay prohibiting the discharge of any student loan debt under the cancellation plan until the appellate court had issued a decision on the states’ motion for an injunction pending an appeal. (Covered by InfoBytes here.) The October order followed a ruling issued by the U.S. District Court for the Eastern District of Missouri, which dismissed the states’ action for lack of Article III standing after concluding that the states—which attempted “to assert a threat of imminent harm in the form of lost tax revenue in the future”— failed to establish imminent and non-speculative harm sufficient to confer standing.

    In granting the emergency motion, the appellate court disagreed with the district court’s assertion that the states lacked standing. The 8th Circuit reviewed whether the state of Missouri could rely on any harm the Missouri Higher Education Loan Authority (MOHELA) might suffer as a result of the Department of Education’s cancellation plan. The appellate court found that the relationship between MOHELA and the state is relevant to the standing analysis, especially as Missouri law specifically directs MOHELA (which receives revenue from the student loan accounts it services) to distribute $350 million into the state’s treasury. As such, “MOHELA may well be an arm of the State of Missouri” under this reasoning, the appellate court wrote, adding that several district courts have concluded that MOHELA is an arm of the state. However, regardless of whether MOHELA is an arm of the state, the resulting financial impact due to the cancellation plan would, among other things, affect the state’s ability to fund public higher education institutions, the 8th Circuit noted. “Consequently, we conclude Missouri has shown a likely injury in fact that is concrete and particularized, and which is actual or imminent, traceable to the challenged action of the Secretary, and redressable by a favorable decision,” the appellate court wrote, adding that since one party likely has standing it does not need to address the standing of the other states. The appellate court also determined that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose.” The 8th Circuit explained that it considered several criteria, including the fact that the collection of student loan payments and the accrual of interest have both been suspended. The Missouri attorney general released a statement applauding the 8th Circuit’s decision.

    The 8th Circuit’s decision follows a recent ruling issued by the U.S. District Court for the Northern District of Texas, which found that the student loan forgiveness program is “an unconstitutional exercise of Congress’s legislative power.” (Covered by InfoBytes here.)

    Courts Student Lending State Issues Department of Education Appellate Eighth Circuit State Attorney General Nebraska Missouri Arkansas Iowa Kansas South Carolina

  • 8th Circuit temporarily pauses Biden’s student debt relief plan

    Courts

    On October 21, the U.S. Court of Appeals for the Eighth Circuit issued an order granting an emergency motion filed by state attorneys general from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina to temporarily prohibit the Biden administration from discharging any federal loans under its student debt relief plan (announced in August and covered by InfoBytes here). The states’ motion requested an administrative stay prohibiting President Biden from discharging any student loan debt under the cancellation plan until the appellate court issues a decision on the states’ motion for an injunction pending an appeal. The order follows an October 20 ruling issued by the U.S. District Court for the Eastern District of Missouri, which dismissed the states’ action for lack of Article III standing after concluding that the states—which attempted “to assert a threat of imminent harm in the form of lost tax revenue in the future”— failed to establish imminent and non-speculative harm sufficient to confer standing. “It should be emphasized that ‘standing in no way depends upon the merits of the Plaintiff[s’] contention that the particular conduct is illegal,’” the district court said. “While Plaintiffs present important and significant challenges to the debt relief plan, the current Plaintiffs are unable to proceed to the resolution of these challenges.” The 8th Circuit ordered an expedited briefing schedule on the states’ motion for an injunction pending appeal, which required both parties to file responses the same week the order was issued.

    Courts Appellate Eighth Circuit Student Lending Biden Department of Education Debt Relief Consumer Finance

  • 8th Circuit affirms decision in FDCPA case

    Courts

    On September 6, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court’s order to grant a defendant’s motion for judgment on the pleadings in an FDCPA suit. According to the opinion, the defendant sent the plaintiff a debt collection letter identifying the plaintiff as the attorney for a consumer named in the letter. The consumer was not the plaintiff’s client, the consumer had never identified the plaintiff as her attorney to anyone, and the plaintiff had never identified himself as the consumer’s attorney. When the plaintiff was unable to recognize the consumer’s name, he engaged in an extensive search of his files and records to determine if he had ever represented the consumer, and “found nothing to indicate that she was a past or present client.” The plaintiff filed suit, asserting that the defendant violated § 1692c(b) of the FDCPA when it contacted him regarding the debt of a consumer whom he did not represent and without the consumer’s consent. The plaintiff alleged that he suffered injury as a result of the violation, because his search for the consumer’s records cost him “valuable time and resources that he could have spent working on matters for actual clients.” The district court ruled that the defendant’s letter violated § 1692c(b) but said that the plaintiff lacked standing to sue under the statute and entered judgment on the pleadings against the plaintiff.

    On appeal, the 8th Circuit agreed with the district court that the defendant violated the FDCPA when it sent the letter to the attorney, but also agreed with other circuit courts that non-consumers cannot bring § 1692c(b) claims. The appellate court noted that “[b]ecause the purpose of § 1692c(b) is to protect consumers alone, we conclude that [the plaintiff] falls outside § 1692c(b)’s ‘zone of interests’ and thus cannot invoke the protection afforded by it.” The 8th Circuit rejected the plaintiff’s argument that the proper course of action was to remand the case back to state court, where it was originally filed, and affirmed that the decision “was a ruling on the merits of [the plaintiff’s] claim, not on the district court’s jurisdiction.”

    Courts Appellate Eighth Circuit FDCPA Debt Collection Consumer Finance

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