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  • District Court says “state of confusion” not an injury under the FDCPA

    Courts

    On April 26, the U.S. District Court for the Northern District of Illinois granted a defendant debt collector’s request for summary judgment and vacated a class certification order following recent decisions issued by the U.S. Court of Appeals for the Seventh Circuit, in which the appellate court held that “the state of confusion is not itself an injury.” The court’s order reversed an earlier ruling that granted class certification and partial summary judgment in favor of a class of Illinois consumers who alleged that the defendant sent misleading or confusing dunning letters that violated the FDCPA by incorrectly identifying the name of the creditor. However, after reconsidering several 7th Circuit holdings (see InfoBytes coverage of Pennell v. Global Trust Management, LLC here), the court concluded that in the absence of any evidence showing that the plaintiff suffered a concrete injury, the plaintiff lacked standing to bring his FDCPA claims. Specifically, the court held that the plaintiff failed to claim that his confusion led him to take any actions to his detriment. Being merely confused is not a concrete injury, the court ruled, emphasizing that the plaintiff “needed to do more than demonstrate a threat that he would fail to exercise his rights because he deemed the letter a scam—he must have actually failed to exercise those rights and suffered some tangible adverse consequence as a result.”

    Courts Class Action Debt Collection Appellate Seventh Circuit

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  • 7th Circuit: “Stress and confusion” not an injury under the FDCPA

    Courts

    On March 11, the U.S. Court of Appeals for the Seventh Circuit held that a consumer’s alleged “stress and confusion” did not constitute a concrete and particularized injury under the FDCPA. The plaintiff alleged that the defendant debt collector violated the FDCPA when it directly communicated with her by sending a dunning letter related to unpaid debt even though she had previously notified the original lender that she was represented by counsel and requested that all debt communications cease. The district court granted the defendant’s summary judgment motion on the grounds that the debt collector could not have violated the FDCPA “without having actual knowledge of [the consumer’s] cease-communication request.”

    On appeal, the 7th Circuit concluded that the complaint should be dismissed for lack of subject-matter jurisdiction because the plaintiff lacked standing. The 7th Circuit held that the consumer’s allegations—that the dunning letter caused her “stress and confusion” and “made her think that ‘her demand had been futile’”—did not amount to a concrete and particularized “injury in fact” necessary to establish Article III standing under the FDCPA. The court further noted that “the state of confusion is not itself an injury”—rather, for the alleged confusion to be concrete, “a plaintiff must have acted ‘to her detriment, on that confusion.’” Here, the consumer pointed only to a statutory violation and “failed to show that receiving [the debt collector’s] dunning letter led her to change her course of action or put her in harm’s way.” Additionally, the appellate court found the consumer’s argument that the dunning letter also “invaded her privacy,” raised for the first time on appeal, unpersuasive because she did not allege that injury in the complaint.

    Courts Appellate Seventh Circuit Debt Collection FDCPA Standing

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  • 7th Circuit affirms dismissal of FDCPA claims for lack of standing

    Courts

    On January 21, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s ruling dismissing a plaintiff’s FDCPA lawsuit for lack of standing. According to the opinion, the plaintiff claimed a debt collector violated the FDCPA when it sent her a collection letter including the following statement: “If you dispute this balance or the validity of this debt, please let us know in writing. If you do not dispute this debt in writing within 30 days after you receive this letter, we will assume this debt is valid.” The plaintiff argued that section 1692g(a)(3) of FDCPA does not specify how a consumer may dispute the validity of a debt, claiming that consumers should be allowed to dispute debts in whatever manner they choose. Instead of determining whether the debt collector violated section 1692g(a)(3) by requiring consumers to dispute debts in writing, the 7th Circuit determined that the plaintiff lacked standing to sue in the first place. The appellate court referenced an observation made by the district court that the plaintiff “‘did not allege she had any doubt that she owed the creditor the stated amount of money,” and that “she failed to allege any injury that flowed from her failure to dispute the debt.” Noting, however, that not all alleged section 1692g(a)(3) violations lack standing, the appellate court stated that in this case, the plaintiff “did not allege injury, because she did not try to show what good a dispute would have done her. She is no worse off than if the letter had told her that she could dispute the debt orally.”

    Courts Seventh Circuit Appellate Debt Collection FDCPA

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  • Satellite company to pay over $200 million for telemarketing violations

    Federal Issues

    On December 7, the DOJ announced a settlement with a satellite service provider totaling over $210 million in penalties to be paid to the United States and four states for alleged violations of the TCPA, the FTC Act, and similar state laws. The settlement stems from an action brought by the United States against the satellite company in 2009 asserting that the company initiated millions of unlawful telemarketing calls to consumers and was responsible for millions of calls made by marketers of the company’s products and services. In 2017, a district court awarded the U.S. and the states of California, Illinois, North Carolina, and Ohio $280 million in civil penalties, with a record $168 million going to the federal government (covered by InfoBytes here). On appeal, the U.S. Court of Appeals for the Seventh Circuit affirmed liability but vacated and remanded the monetary award for recalculation.

    The stipulated judgment requires the satellite company to pay over $200 million in civil penalties, with $126 million going to the U.S. government, nearly $40 million to California, over $6.5 million to Illinois, nearly $14 million to North Carolina, and $17 million to Ohio.

    Federal Issues DOJ TCPA Telemarketing Sales Rule FTC Act FTC State Issues Courts Appellate Seventh Circuit

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  • 7th Circuit: No FDCPA liability when collection letter leaves future ambiguity

    Courts

    On October 8, the U.S. Court of Appeals for the Seventh Circuit affirmed dismissal of an FDCPA action, concluding that itemized breakdowns in collection letters that include zero balances for interest and other charges would not confuse or mislead the reasonable “unsophisticated consumer” to believe that future interest or other charges would be incurred if the debt is not settled. A creditor charged-off a consumer’s credit card debt and informed the consumer that it would no longer charge interest or fees on the account. The debt was reassigned to a collection agency.  Consistent with the original creditor’s communication with the consumer, the collection agency sent a collection letter to the consumer that included an itemized breakdown reflecting a zero balance for “interest” and “other charges.” The “balance due at charge-off” and “current balance” were both listed as $425.86. The letter offered to resolve the debt and stated that no interest would be added to the account balance through the course of collection efforts. The consumer filed a putative class action alleging that the collection letter implied that the original creditor would begin to add interest and fees to the charged-off debt if the collection agency stopped its collection efforts in the future and, therefore, the debt collector violated the FDCPA by using false, deceptive and misleading representations to collect a debt, and failed to disclose the amount of the debt in a clear and unambiguous fashion. The district court dismissed the action, concluding that the collection letter accurately disclosed the amount of the debt.

    On appeal, the 7th Circuit agreed with the district court. Specifically, according to the opinion, the appellate court concluded that the breakdown of charges in the letter “cannot be construed as forward looking,” rejecting the consumer’s argument that including zero balances implies that future interest or charges could be incurred if he did not accept the collector’s offer. Moreover, the appellate court noted that when a collection letter “only makes explicit representations about the present that are true, a plaintiff may not establish liability on the basis that it leaves ambiguity about the future.” The statement in the letter that no interest would accrue while the collector pursued the debt is not misleading because it “makes no suggestion regarding the possibility that interest will or will not be assessed in the future if [the debt collector] ends its collection efforts.” 

    Courts Debt Collection Appellate Seventh Circuit FDCPA

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  • 3rd Circuit: Section 13(b) of the FTC Act does not give the agency restitution power

    Courts

    On September 30, the U.S. Court of Appeals for the Third Circuit reversed a district court’s order of $448 million in disgorgement, concluding that disgorgement is not a remedy available under Section 13(b) of the FTC Act. According to the opinion, the FTC brought an action against the owners of a testosterone treatment patent (defendants) for allegedly “trying to monopolize and restrain trade over [the treatment],” in violation of Section 13(b) of the FTC Act. The district court dismissed the FTC’s claims related to the reverse-payment agreement the defendants entered into with another pharmaceutical company but held the defendants liable for the FTC’s sham-litigation allegations and ordered the defendants to pay $448 in disgorgement of ill-gotten gains. The district court denied the FTC’s request for an injunction.

    On appeal, the 3rd Circuit concluded, among other holdings, that the court erred by ordering disgorgement, as it lacked the authority to do so under Section 13(b) of the FTC Act. Specifically, the appellate court noted that Section 13(b) “authorizes a court to ‘enjoin’ antitrust violations,” but is silent on disgorgement. The appellate court rejected the FTC’s contention that Section 13(b) “impliedly empowers district courts” to order disgorgement as well as injunctive relief, concluding that “the context of Section 13(b) and the FTC Act’s broader statutory scheme both support ‘a necessary and inescapable inference’ that a district court’s jurisdiction in equity under Section 13(b) is limited to ordering injunctive relief.” Thus the appellate court reversed the order of $448 million in disgorgement.

    In reaching this conclusion, the appellate court noted its determination was consistent with the 7th Circuit’s decision FTC v. Credit Bureau Center (covered by InfoBytes here), which also held that the FTC does not have the power to order restitution under Section 13(b). As previously covered by InfoBytes, the U.S. Supreme Court granted consolidated review in Credit Bureau Center and in the 9th Circuit’s decision in FTC v. AMG Capital Management (covered by InfoBytes here). The Court will decide whether the FTC can demand equitable monetary relief in civil enforcement actions under Section 13(b) of the FTC Act.

    Courts FTC Restitution FTC Act Injunction Third Circuit Appellate Seventh Circuit Ninth Circuit U.S. Supreme Court

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  • Supreme Court to review FHFA structure, FTC restitution, and TCPA autodialing

    Courts

    On July 9, the U.S. Supreme Court agreed to review the following cases:

    • FHFA Constitutionality. The Court agreed to review the U.S. Court of Appeals for the Fifth Circuit’s en banc decision in Collins. v. Mnuchin (covered by InfoBytes here), which concluded that the FHFA’s structure—which provides the director with “for cause” removal protection—violates the Constitution’s separation of powers requirements. As previously covered by a Buckley Special Alert last month, the Court held that a similar clause in the Dodd-Frank Act that requires cause to remove the director of the CFPB violates the constitutional separation of powers. The Court further held that the removal provision could—and should—be severed from the statute establishing the CFPB, rather than invalidating the entire statute.
    • FTC Restitution Authority. The Court granted review in two cases: (i) the 9th Circuit’s decision in FTC V. AMG Capital Management (covered by InfoBytes here), which upheld a $1.3 billion judgment against the petitioners for allegedly operating a deceptive payday lending scheme and concluded that a district court may grant any ancillary relief under the FTC Act, including restitution; and (ii) the 7th Circuit’s FTC v. Credit Bureau Center (covered by InfoBytes here), which held that Section 13(b) of the FTC Act does not give the FTC power to order restitution. The Court consolidated the two cases and will decide whether the FTC can demand equitable monetary relief in civil enforcement actions under Section 13(b) of the FTC Act.
    • TCPA Autodialer Definition. The Court agreed to review the U.S. Court of Appeals for the Ninth Circuit’s decision in Duguid v. Facebook, Inc. (covered by InfoBytes here), which concluded the plaintiff plausibly alleged the social media company’s text message system fell within the definition of autodialer under the TCPA. The 9th Circuit applied the definition from their 2018 decision in Marks v. Crunch San Diego, LLC (covered by InfoBytes here), which broadened the definition of an autodialer to cover all devices with the capacity to automatically dial numbers that are stored in a list. The 2nd Circuit has since agreed with the 9th Circuit’s holding in Marks. However, these two opinions conflict with holdings by the 3rd, 7th, and 11th Circuits, which have held that autodialers require the use of randomly or sequentially generated phone numbers, consistent with the D.C. Circuit’s holding that struck down the FCC’s definition of an autodialer in ACA International v. FCC (covered by a Buckley Special Alert).

    Courts FHFA Single-Director Structure TCPA Appellate FTC Restitution FTC Act Autodialer Ninth Circuit Seventh Circuit Fifth Circuit D.C. Circuit Third Circuit Eleventh Circuit U.S. Supreme Court

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  • 7th Circuit dismisses FDCPA action over interest accrued post-write off

    Courts

    On June 19, the U.S. Court of Appeals for the Seventh Circuit affirmed the dismissal of an action alleging a debt collector violated the FDCPA by attempting to collect interest that accrued on a debt after the creditor wrote off the debt but before the collector acquired it. According to the opinion, the plaintiffs’ original unpaid debt was $3,226.35 before the original creditor ceased collection efforts and stopped sending monthly statements. Approximately two years later, the creditor sold the debt to the collection agency, and approximately two years after that, the debt collector sent a demand letter seeking payment of $5,800, which included around $1,600 in interest for the months after the original creditor ceased collection efforts. The debt collector sent a second letter two months later, and a third letter the following year to their attorney in response to the attorney’s request to verify the debt, but the third letter did not explain how much of the debt was interest. The plaintiffs filed the action against the debt collector, alleging the collector violated the FDCPA’s prohibition on false, deceptive, or misleading representations in connection with collection of a debt by demanding interest that accrued between charge-off and sale. The district court dismissed the action as untimely.

    On appeal, the 7th Circuit affirmed dismissal, but determined the suit was filed timely. Specifically, the appellate court concluded that the one year statute of limitations applied to the third letter the debt collector sent to the plaintiffs’ lawyer in response to a demand for debt verification. However, the appellate court concluded that the third collection letter did not violate the FDCPA, arguing the plaintiffs “promised to pay interest, and [the debt collector]’s computer used the correct rate.” Moreover, the appellate court stated that “[a] statement is false, or not, when made; there is no falsity by hindsight,” and previous instances in the circuit “in which a letter was deemed to have falsely stated the amount of the debt dealt with errors known or readily knowable when the letter was sent.” Lastly, the appellate court rejected the plaintiffs’ post-argument submission that the debt collector “must openly state the legal position behind its calculation” in order to avoid having the letter be misleading, noting that the third letter was sent to their lawyer, and it “would not have misled a competent lawyer.”

    Courts Appellate Seventh Circuit FDCPA Debt Collection

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  • District court holds text system is not an autodialer under 7th Circuit definition

    Courts

    On June 15, the U.S. District Court for the Southern District of Indiana granted a motion for summary judgment in favor of a collection agency and another company (collectively, “defendants”) with respect to the plaintiff’s TCPA allegations, holding that the system used to send text messages to class members’ cell phones is not an automatic telephone dialing system (autodialer). According to the opinion, the plaintiff filed the class action alleging, among other things, that the defendants violated the TCPA by sending unsolicited text messages using an autodialer to cell phones after the recipients replied with “stop.” The parties submitted cross-motions for summary judgment, which were stayed pending the outcome of the U.S. Court of Appeals for the Seventh Circuit decision in Gadelhak v. AT&T Servs., Inc. As previously covered by InfoBytes, the 7th Circuit held in February that to be an autodialer under the TCPA, the system must both store and produce phone numbers “using a random or sequential number generator.” After reviewing the cross-motions in light of the 7th Circuit decision, the court concluded that the system used by the defendants is not an autodialer under the controlling definition because the defendants’ system sends text messages to cell phone numbers from stored customer lists. Notwithstanding the fact that neither party disputes that the text messages sent to the class members post-“stop” message were without their consent, the court granted summary judgment in favor of the defendants because the text messages were not sent using an autodialer.

    Courts Appellate Seventh Circuit TCPA Autodialer

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  • 7th Circuit upholds summary judgment in favor of debt collector

    Courts

    On June 9, the U.S. Court of Appeals for the Seventh Circuit affirmed summary judgment in favor of a third-party debt collector in a class action asserting violations of the FDCPA. According to the opinion, a consumer filed a putative class action alleging the debt collector sent a misleading letter in violation of the FDCPA because the letter stated that her debt “may be reported to the national credit bureaus.” The consumer argued that the use of the word “may” was deceptive, as it implied “future reporting” even though the debt had already been reported at the time she received the letter. The debt collector moved to dismiss the action, which the district court denied, concluding that whether a communication is misleading is a question of fact and therefore, “dismissal would be premature.” After class certification, the consumer and the debt collector submitted cross-motions for summary judgment, and the district affirmed in favor of the debt collector.

    On cross-appeals, the 7th Circuit agreed with the district court’s denial of the debt collector’s motion to dismiss, stating that “[w]hether a significant fraction of debtors would be misled as [the consumer] describes is questionable, but it is not so implausible….” As for summary judgment, the appellate court also agreed with the district court, concluding that the consumer “failed to present any evidence beyond her own opinion” that the collection letter was misleading. The appellate court rejected the consumer’s assertion that her own opinion was evidence enough and noted that the consumer cited to cases using the “least sophisticated consumer standard,” which the 7th Circuit has rejected. Moreover, the appellate court emphasized that the consumer failed “to provide any outside evidence as to the likelihood that a hypothetical unsophisticated debtor (or even the least sophisticated debtor) would in fact be confused by the language in [the debt collector]’s letter.”

    Courts Appellate FDCPA Seventh Circuit Debt Collection

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