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District Court finds “negative emotions” alone do not establish standing under the FDCPA
Recently, the U.S. District Court for the Eastern District of Missouri granted a debt collector’s motion to dismiss, finding that the plaintiff’s allegations of injury after receiving one letter that violated the FDCPA did not establish standing. The plaintiff sued the debt collector under Sections 1692e and 1692g of the FDCPA, alleging that the defendant (i) made false and misleading representations, and (ii) continued to collect the debt without proper validation by sending the plaintiff a collection letter with the wrong account number and purporting the plaintiff is personally liable for her deceased husband’s medical debt. The plaintiff asserted her injuries because of receiving the letter included expending time and money to mitigate the risk of future financial harm and fear, anxiety, and stress, which “manifested physically in the form of increased heartrate.”
The court found that the plaintiff did not allege sufficient facts to establish, or for the court to infer, a tangible injury because the plaintiff only stated she lost money without providing additional detail on what that entailed. Additionally, the court relied on the holdings of Courts of Appeals and found that the plaintiff’s alleged emotions of fear, anxiety, and stress alone do not state a cognizable or “particularized, concrete” injury.
California DFPI proposes new regulations under the Debt Collection Licensing Act
On February 9, the California Department of Financial Protection and Innovation (DFPI) published a proposed rule to adopt new regulations under the Debt Collection Licensing Act (DCLA). Under the DCLA, a debt collector licensee is required to pay the DFPI Commissioner its “pro rata share of all costs and expenses incurred in the administration” of the DCLA, which is calculated in part based on the licensee’s “net proceeds generated by California debtor accounts,” but the term “net proceeds” was not defined in the statute. The proposed rule defines “net proceeds generated by California debtor accounts” to mean “the amount retained by a debt collector from its California debt collection activity.” The proposed rule also specifies the formulas used in calculating the net proceeds depending on the party, including a debt buyer, purchaser of debt that has not been charged off or in default, third-party collector, and first-party collector.
Additionally, the proposed rule requires licensees to file an annual report with the DFPI and specifies the information required in the annual report, including (i) the number of California debtor accounts collected on in the previous year; (ii) the number of California debtor accounts in the licensee’s portfolio as of December 31 of the preceding year; and (iii) the number and dollar amount of California debtor accounts for which collection was attempted, but not successfully collected or resolved during the previous year. Comments to the proposed rule must be submitted by March 27.
District Court dismisses FDCPA class action lawsuit for lack of standing on alleged concrete injuries suffered
On January 31, the U.S. District Court for the Eastern District of New York dismissed an FDCPA class action lawsuit for lack of standing. According to the order, plaintiff alleged numerous violations of the FDCPA related to two debt collection letters sent to the plaintiff and his girlfriend. In September 2023, a debt collector (defendant) reportedly sent two letters to the plaintiff which allegedly did not contain the requisite information mandated by the FDCPA for communication with consumers, including validation and itemization details. One of the letters purportedly demanded payment by September 29, falling within the 30-day validation period. Additionally, plaintiff asserted that one of the letters was addressed to his girlfriend who bore no responsibility for the debt. Plaintiff claimed two concrete injuries: (i) the letters allegedly strained his relationship with his girlfriend, causing emotional distress; and (ii) due to the omission of critical information in the letters, plaintiff felt confused and uncertain about how to effectively respond.
In considering the plaintiff’s claims, the court discussed the elements required to state a claim for publicity given to private life and examines a specific case where such a claim was rejected by the court. It highlights that for such a claim to succeed, the matter publicized must be highly offensive to a reasonable person and not of legitimate public concern. Additionally, mere communication of private information to a single person typically does not constitute publicity, unless it has the potential to become public knowledge. Although Congress explicitly prohibits debt collectors from sharing consumer financial information with third parties, the court noted that it “does not automatically transform every arguable invasion of privacy into an actionable, concrete injury.” Therefore, the plaintiff's injury, as pleaded, was deemed insufficiently concrete for standing purposes. Regarding the second alleged injury, the court argued that confusion alone does not suffice as a concrete injury for standing purposes, and courts have determined that mere confusion or frustration does not qualify as an injury. Additionally, the court compared the case to other cases where plaintiffs had alleged confusion yet had also demonstrated further injuries.
District Court grants MSJ for defendant for not acting as a debt collector
On January 22, the U.S. District Court for the Northern District of Illinois granted a defendant’s motion for summary judgment in an FDCPA case. According to the order, a hospital that treated plaintiff referred his medical bills to defendant, who services hospitals throughout revenue cycles and acts as an extension of the hospital to service patient accounts. In a letter sent by defendant to plaintiff, defendant stated that the amount was not currently in default but emphasized the importance of hearing from plaintiff. After receiving this first statement from defendant, plaintiff’s attorney contacted defendant explaining plaintiff’s situation, and advised defendant to cease communications. Despite the request, defendant sent a follow-up statement, similar to the first, which plaintiff assumed meant that the debt was in default and required urgent attention. Subsequently, plaintiff paid the outstanding medical debt.
Plaintiff then filed a lawsuit against defendant, alleging that the statements sent by defendant did not comply with disclosures mandated by the FDCPA. Defendant filed a motion for summary judgment, contending that it is not a debt collector covered by the Act. The defendant further argued that since the FDCPA’s definition of “debt collector” expressly excludes “any person collecting or attempting to collect any debt owed… which was not in default at the time that it was obtained by such person,” defendant was not a debt collector because they never treated the medical debt as in default. Although the FDCPA does not define when a debt is “in default,” the court found that the hospital and defendant never treated the debt as defaulted at the time of assignment, and since it did not acquire a defaulted debt to collect, defendant is therefore not considered a covered debt collector under the FDCPA. The court also found issues with plaintiff’s assertations, concluding that they were not applicable to defendant, as it is not a “debt collector” nor a “collection agency,” and that there was no genuine issue of material fact on the question of whether plaintiff’s debt was “in default” at the time it was assigned. As such, the court granted defendant’s motion for summary judgment as a matter of law, indicating that, based on the reasons provided, defendant is not considered a debt collector under the FDCPA.
District Court: Plaintiff has standing but still dismisses FCRA case
On January 19, the U.S. District Court for the District of New Jersey granted a bank’s motion to dismiss an FCRA case. According to the opinion, after plaintiff’s credit report revealed monthly payments towards previously closed accounts with defendant, plaintiff alleged that because the accounts were closed, the entire balance was due and that she had neither the right nor the obligation to pay defendant in monthly installments. Plaintiff then disputed the debt with a credit reporting agency, which forwarded the dispute to defendant, but ultimately plaintiff’s credit report was never updated to $0 monthly payments as she requested. Three days later, plaintiff filed suit alleging defendant violated the FCRA by failing to investigate the dispute and failing to direct the credit reporting agency to report the tradelines with $0 monthly payments. Although plaintiff does not assert in her complaint that her credit reports have been distributed to any potential lender, plaintiff alleged that the tradelines listed in her credit report are inaccurate and “create a misleading impression of her consumer credit file.”
In determining Article III standing, the court held that plaintiff sufficiently alleged injury in fact because defendant’s “false and misleading reporting to a credit bureau about Plaintiff’s obligation on a debt has a close relationship to reputational harms such as defamation and common law fraud.” The court acknowledged, however, that “[l]ower courts have split on the issue of whether dissemination of a defamatory statement to a credit reporting agency, as opposed to the potential creditors at issue.” On one hand, the U.S. Supreme Court found that class members whose misleading credit reports were not disseminated to a third party did not suffer concrete harm. In another case, the Seventh Circuit concluded that plaintiffs adequately proved third-party dissemination by presenting evidence that debt collectors reported false information about them to a credit reporting agency, dismissing any interpretation precedent that would demand the plaintiffs to additionally demonstrate that the third party shared the false information. The court agreed with the latter decision, citing that “dissemination to a credit reporting agency suffices to establish defamatory publication for standing purposes.”
Although plaintiff established Article III standing, the court found that plaintiff failed to state a claim under the FCRA because she failed to allege that the tradelines issued by defendant contain inaccurate information. Furthermore, the court found that a report, as plaintiff requested, showing $0 monthly payments on the account would be more misleading, because it would purport that plaintiff does not owe a balance to defendant.
Colorado Attorney General fines debt collector $500,000 for collecting on illegal loans
On January 16, the Colorado State Attorney General (AG) reached a settlement agreement with a third-party debt collection company that is ordered to pay $500,000 to the State. The company previously contracted to collect debt from consumers on behalf of unlicensed lending entities associated with Native American tribes, or Tribal Lending Entities (TLEs). According to the settlement agreement, none of the TLEs were licensed Colorado lenders and all of their loan agreements with consumers contained finance charge terms that exceeded the Uniform Consumer Credit Code’s 12 percent finance charge cap on unlicensed lenders—with most having interest rates that exceeded 500 percent APR and some up to 900 percent APR. The AG alleged that, between 2017 and 2022, the company violated the Colorado Fair Debt Collection Practices Act by using “unfair or unconscionable means” to collect on defaulted TLE-issued loans by representing to consumers that the entire loan balance was owed to the TLEs, that the company was legally authorized to collect the payments, and that consumers were legally obligated to pay the full amount. The company denies that its conduct violated any state law and otherwise denies all allegations of wrongdoing. Along with the penalty, the company will be barred from collecting on any debt where the loan’s APR exceeded the 12 percent cap and will provide the State with a list of affected consumers within 30 days.
District Court dismisses FDCPA class action for lack of standing
Recently, the U.S. District Court for the Eastern District of New York dismissed a class action lawsuit alleging that a debt collector’s (defendant) collection notice violated the FDCPA by including two different balances absent any explanation, leaving plaintiff confused and unable to pay the debt. Plaintiff also alleged she suffered emotional harm and expended time and money as a consequence of defendant’s letter.
The district court held that plaintiff’s “mere” allegations of wasted time, resources, and efforts after receiving the collection letter do not establish injury-in-fact. Furthermore, the allegations do not support standing because “the burdens of bringing a lawsuit cannot be the sole basis for standing.” Additionally, in response to claims of emotional harms, the district court found that the allegations are “virtually identical to those that have been rejected in other similar FDCPA cases.” Ultimately, the district court found that “[p]laintiff does not clearly allege facts that demonstrate standing to pursue her claims in federal court, and the Court consequently lacks jurisdiction over this action.”
CFPB files amicus brief on FDCPA case regarding scienter
On January 2, the CFPB announced its filing of an amicus brief in the U.S. Court of Appeals for the First Circuit that takes the position that debt collectors can and should be held strictly liable under the FDCPA regardless of whether they knowingly or unknowingly made a false statement. As the administrator and enforcer of the FDCPA, the CFPB cites that under Section 1692e of the FDCPA, debt collectors are prohibited from “us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt.” According to the brief, Section 1692e’s general prohibition does not include a scienter requirement and does not require that a “representation be knowingly or intentionally false, deceptive, or misleading to violate that prohibition.” The CFPB continues that since Congress selectively included an express scienter requirement, which is a level of intent or knowledge required to establish liability, in specific provisions of the FDCPA, but did not include one in Section 1692e, that indicates Congress did not implicitly intend for Section 1692e to include a scienter requirement. The CFPB also noted that “every federal court of appeals to have addressed this issue (8 in total) has held that Section 1692e does not include a scienter requirement.”
District Court affirms FDCPA case dismissal
On December 21, 2023, the U.S. District Court for the District of Oregon affirmed the dismissal of an FDCPA case after it granted a debt collector’s motion to dismiss in March 2023 because the plaintiff’s claims were filed outside of the one-year statute of limitations. The plaintiff contended that the court made a clear error by dismissing their claim as untimely without considering the potential impact of equitable tolling on the limitations period. The court held that the plaintiff's request for reconsideration based on equitable tolling was not raised in response to the defendant’s motion to dismiss and was declined. Plaintiff also referenced a new legal precedent, set earlier this year, arguing that it impacts the timing of their claims under the FDCPA. However, the court found this reference untimely and unrelated to the original motion. As previously covered in InfoBytes, the referenced case established that both serving and filing a lawsuit could be independent violations of the FDCPA, depending on certain conditions. However, in this case, where service occurred after filing, the court determined that it did not constitute a new FDCPA violation. Therefore, the court denied the plaintiff's motion for reconsideration based on this precedent.
California Appellate Court overturns ruling on FDCPA
On December 18, a California Court of Appeal overturned a lower court’s dismissal of a case involving claims under the federal FDCPA and California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). The appellate court found the lower court had erred in dismissing the case pursuant to California’s anti-SLAPP statute, which provides a mechanism for early dismissal of meritless lawsuits arising from protected communicative activities.
The dismissal arises from a class action filed in 2021, alleging that the defendant debt collector – who had filed an action to collect on a defaulted student loan – lacked the documents necessary to collect or enforce the loan, and thus violated the FDCPA and the Rosenthal Act. The complaint also claimed the collector violated California’s Unfair Competition Law (UCL) by engaging in “prohibited unlawful, unfair, fraudulent, deceptive, untrue, and misleading acts and practices as part of its direct and indirect collection and attempted collection of debts that have previously been adjudicated.” The complaint referenced a 2017 CFPB consent order with the defendant, previously covered by InfoBytes here, where the consent order involved allegations that the collector had filed lawsuits against consumers for private student loan debt that it could not prove was owed or that was outside the applicable statute of limitations.
In response to the complaint, the defendant debt collector filed a demurrer and an anti-SLAPP motion. While the lower court granted the anti-SLAPP motion, the appellate court reversed, concluding that the plaintiff’s claims were not barred by the litigation privilege. The appellate court found that the lower court had “only considered the litigation privilege in considering the probability that [the plaintiff] would prevail on her claims,” and did not consider the public interest exception to California’s anti-SLAPP law (which provides that the anti-SLAPP law does not apply to actions brought solely in the public interest or on behalf of the general public if certain conditions are met). The appellate court directed the trial court to determine whether the plaintiff met her burden of demonstrating a probability of prevailing on the merits of her claims and to consider the public interest exception.