Banking and Finance Law Daily Consumer did not establish threshold ‘injury’ to sustain her FDCPA claim
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Friday, January 22, 2021

Consumer did not establish threshold ‘injury’ to sustain her FDCPA claim

By Thomas G. Wolfe, J.D.

The consumer claimed that a collection letter to her violated the FDCPA because it stated that if she disputed the amount or validity of the alleged debt, she needed to communicate that "in writing."

While a consumer alleged that a debt collector violated the Fair Debt Collection Practices Act provision requiring a collector to provide her with proper notice of her FDCPA right to dispute the amount or validity of an alleged debt, a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit determined that the consumer did not sufficiently allege a concrete injury. In dismissing the consumer’s FDCPA lawsuit, the appellate panel emphasized that it was not ruling on the legal issue of "whether a debt collector violates §1692g(a)(3) by telling consumers to put their disputes in writing," nor was it holding that someone asserting a violation of FDCPA §1692g(a)(3) cannot establish an injury. Rather, the consumer did not adequately allege an 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," the panel asserted (Smith v. GC Services Limited Partnership, Jan. 21, 2021, Easterbrook, F.).

In 2018, the Seventh Circuit previously held in the case that the debt collector, GC Services Limited Partnership, "had waived or forfeited any entitlement to arbitrate its dispute" with the consumer-plaintiff, Francina Smith. The federal district court then held that the consumer "had not been injured" and dismissed her FDCPA lawsuit. As observed by the judicial panel, the Seventh Circuit recently addressed "several other cases that presented questions about standing to sue under the Fair Debt Collection Practices Act" (see Banking and Finance Law Daily, Dec. 17, 2020).

Consumer’s complaint. The consumer alleged in her complaint that GC Services violated the FDCPA (15 U.S.C. §1692g(a)(3)) because the company’s debt collection letter to her stated, among other things: "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 consumer maintained that the debt collection letter violated section 1692g(a)(3) of the FDCPA, which requires a debt collector to send each consumer "a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector." Since the FDCPA provision does not explicitly say that the statement disputing the amount or validity of the debt must be in writing, the consumer contended that she was "entitled to choose how to dispute" the debt. Had she known that she "could dispute the debt orally, she would have done so," the consumer argued.

Appellate review. At the outset, the panel noted that "[t]his circuit has not addressed the question whether a debt collector violates §1692g(a)(3) by telling consumers to put their disputes in writing." However, the panel made it clear that it was not taking up that precise issue "because we agree with the district court that Smith lacks standing to sue."

Addressing the threshold issue of Article III standing, the panel noted that the case record did not indicate that the consumer intended to dispute the pertinent debt. In addition, the trial court judge observed that the consumer "did not allege she had any doubt that she owed the creditor the stated amount of money" and did not adequately allege "any injury that flowed from her failure to dispute the debt."

From the Seventh Circuit panel’s perspective, the statutory right to "dispute the validity of an asserted debt can be valuable if the debt collector is mistaken about how much the consumer owes, or to whom. But when the debt collector is not mistaken—and Smith does not allege that GC Services has been trying to collect anything that she does not owe—a given statutory right may have little or no value."

According to the panel, "We do not hold that someone asserting a violation of §1692g(a)(3) cannot establish injury; we hold only that Smith 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." Determining that the consumer was "uninjured," the panel affirmed the judgment of the federal trial court dismissing the FDCPA lawsuit for lack of Article III standing.

The case is No. 19-3494.

Attorneys: Leah M. Nicholls (Public Justice) for Francina Smith. Hilary L. Palazzolo (Rudnicki Firm) for GC Services Ltd. Partnership and Owners Resource Group, GC GP Buyer, LLC.

Companies: GC Services Ltd. Partnership; Owners Resource Group, GC GP Buyer, LLC

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