Seventh Circuit Finds No Standing in Four FDCPA Appeals, Remands Fifth for Further Findings

On December 14 and 15, 2020, four different panels of the Seventh Circuit issued five published opinions, holding on various grounds that the Fair Debt Collection Practices Act (FDCPA) plaintiffs failed to plausibly allege an injury under Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) … but holding in one case that there might be an injury, subject to further findings.

Larkin v. Finance System of Green Bay, No. 18-3582 (7th Cir. Dec. 14, 2020) (Sykes, C.J.): Two plaintiffs in separate actions challenged letter sent by a collection agency to collect on medical bills. They included the challenged language “[y]ou want to be worthy of the faith put in you by your creditor,” which they alleged was “false, deceptive, or misleading representations” and “unfair or unconscionable” practices in the collection of consumer debts under the FDCPA, 15 U.S.C. §§ 1692e and 1629f. The panel, consolidating the appeals, holds that the alleged language caused them no injury within the meaning of Article III. While the complaints alleged that the language did not comport with the FDCPA, “neither complaint contains any allegation of harm—or even an appreciable risk of harm—from the claimed statutory violation.” While plaintiffs argued that the action concerned the “substantive” prohibitions of the act, an “FDCPA plaintiff must allege a concrete injury regardless of whether the alleged statutory violation is characterized as procedural or substantive.” The only argument concerning an injury is that the debt letter might impair the debtors’ relationship with their doctors, but this interest was too abstract: “There is no allegation that the collection letters deterred Larkin or Sandri from seeking medical care or that any provider would refuse to treat them.”

Gunn v. Thrasher, Buschmann & Voelkel, No. 19-3514 (7th Cir. Dec. 15, 2020) (Easterbrook, J.): A couple “fell behind in paying assessments owed to their homeowners’ association.” The defendant law firm sent a collection letter that stated in part that “If Creditor has recorded a mechanic’s lien, covenants, mortgage, or security agreement, it may seek to foreclose such mechanic’s lien, covenants, mortgage, or security agreement.” The couple claimed the letter was misleading “because the law firm would have found it too costly to pursue foreclosure to collect a $2,000 debt.” The panel finds no injury here as well. “[Plaintffs] did not pay anything in response and do not say that the sentence about foreclosure could have reduced their credit rating. And the letter could not have affected their ownership interest.” On appeal, they also argued that the letter “annoyed or intimidated,” but the panel rejects this argument. “Consider the upshot of an equation between annoyance and injury. Many people are annoyed to learn that governmental action may put endangered species at risk or cut down an old-growth forest. Yet the Supreme Court has held that, to litigate over such acts in federal court, the plaintiff must show a concrete and particularized loss, not infuriation or disgust …. Indeed, it is hard to imagine that anyone would file any lawsuit without being annoyed (or worse). Litigation is costly for both the pocketbook and peace of mind. Few people litigate for fun. Yet the Supreme Court has never thought that having one’s nose out of joint and one’s dander up creates a case or controversy.” The panel also disaffirms the procedural/substantive distinction proffered in Larkin.

Brunett v. Convergent Outsourcing Inc., No. 19-3256 (7th Cir. Dec. 15, 2020) (Easterbrook, J.): A collection letter informed the debtor “that if the creditor ended up forgiving more than $600, it would be required to report the release of indebtedness to the Internal Revenue Service on Schedule 1099-C, because federal law treats as taxable income a loan that is not repaid.” Plaintiff contended that the threat of reporting to the IRS violated the FDCPA, 15 U.S.C. §1692e(5), (10), because such action could not legally be taken in her case (the debt was too small) and amounted to a false representation. Yet again, the panel knocks the case out on standing grounds, holding that a doubtful assertion of law in a collection letter is not by itself an injury. “A debtor confused by a dunning letter may be injured if she acts, to her detriment, on that confusion—if, for example, the confusion leads her to pay something she does not owe, or to pay a debt with interest running at a low rate when the money could have been used to pay a debt with interest running at a higher rate. But the state of confusion is not itself an injury.” That the plaintiff had to hire a lawyer to understand the letter was likewise not an injury.  “Even innocuous statements about tax law may lead people to consult counsel. The proposition that forgiving debt is a form of income is not intuitive to nonlawyers (or even to some lawyers). A desire to obtain legal advice is not a reason for universal standing.”

Spuhler v. State Collection Service, Inc., No. 19-2630 (7th Cir. Dec. 15, 2020) (Kanne, J.): Here, the plaintiffs alleged “that the defendant debt collector sent them collection letters that were misleading, in violation of the FDCPA, because the letters lacked a statement that interest was accruing on the debts,” supposedly in violation of in violation of the FDCPA, 15 U.S.C. §§ 1692e(2)(A), 1692f. Citing Larkin, the panel holds that receiving a misleading letter just by itself is not an injury. “[F]or a concrete injury to result from a dunning letter’s exclusion of a statement about accruing interest, that exclusion must have detrimentally affected the debtors’ handling of their debts.” Yet “[t]he record contains no evidence that the absence of a statement about interest had any effect on how the Spuhlers responded to the letters or managed their debts …. Simply put, [plaintiffs] gave no indication that the allegedly missing information from the letters affected [their] response to them or [their] debts.”

Bazile v. Finance System of Green Bay, No. 19-1298 (7th Cir. Dec. 15, 2020) (Kanne, J.): Only in the fifth and final case did the plaintiff at least present a disputed issue of fact about an injury. Plaintiff “alleged that the letter’s exclusion of information concerning the accrual of interest was a violation of the FDCPA because the letter was misleading and did not provide ‘the amount of the debt.’ 15 U.S.C. § 1692g(a)(1); see id. § 1692e.” The panel queries whether the absence of such information cause the plaintiff to suffer at least a real risk of a concrete injury. Here, the panel holds that her allegations might be sufficient. “She pled that the collector’s letter deprived her of information, which resulted in a misleading or inaccurate statement of the debt’s amount. She also made these allegations against the backdrop of Wisconsin law, which—in at least some circumstances—permits interest to accrue on medical debts.” It was possible that “Bazile, not knowing that the debt mentioned in the letter was accruing interest, chose to pay another debt with a lower interest rate, causing her to lose the difference between the interest that accrued under the two rates.” Absent the required information, plaintiff quite possibly “didn’t know at that time exactly how her choice in debt management would have differed with that information.” On remand, the defendant would be permitted to rebut these assertions of injury: “The collector specifically maintains that no interest has or will accrue on the debt, implying that Bazile could not have suffered an injury from the letter’s omission concerning interest accrual. The truth of this assertion, along with Bazile’s actions or inactions in response to the letter’s exclusion of information about interest, should be determined through an evidentiary hearing …. We therefore remand for an evidentiary hearing on whether Bazile has standing to sue.”

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