Archives for June 2020

The Consumer Financial Protection Bureau published a notice in the Federal Register announcing that it is launching a pilot Advisory Opinion (AO) Program. With this program, the CFPB would provide advisory opinions in areas of regulatory uncertainty. The CFPB created the pilot in response to feedback it received through its Request for Information  Regarding Bureau Guidance and Implementation Support—part of the series of RFIs released by the CFPB in early 2018 when Mick Mulvaney temporarily took over the directorship of the agency.

The goal of the pilot program is:

[T]o provide guidance with interpretive content that is: Focused on regulatory uncertainty identified by requestors; reliable for the requestor and all similarly situated parties as the Bureau’s authoritative interpretation of the law; and publicly released for the awareness of all affected persons. 

Requests can be submitted via email to advisoryopinion@cfpb.gov with some information to help the CFPB. Most notably, pilot program requests cannot be annonymous—requests submitted must idenitfy the requestor, and the CFPB is not allowing requests from trade associations or law firms on behalf of unnamed entities.

Advisory opinions that are birthed from this process “will be applicable to the requestor and to similarly situationed parties to the extent that their situations conform to the Bureau’s summary of material facts in the AO.”

To determine whether an AO is appropriate, the CFPB will weigh certain factors, such as:

• The issue in question has been noted during prior CFPB examinations as one that could benefit from regulatory clarity;
• The issue is of substantive importance or impact, or whose clarification would provide significant benefit; 
• The issue relates to ambiguity that has not already been addressed by the CFPB through an interpretive rule or other authoritative sources. 

Issues that factor against the appropriateness of an AO include:

• That the issue is subject to an ongoing investigation or enforcement action;
• That the issue is subject to ongoing rulemaking;
• The issue is better-suited for the notice-and-comment process;
• The issue could be addressed through a compliance aid; 
• there is clear precedent already available to the public on the issue.

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insideARM Perspective

At first blush, this seems like a positive step for the industry, which has been mired in decades of outdated, unclear rules of the road—and the ensuing endless litigation from such deficiencies. However, since debt collection is already the subject of an extensive, ongoing rulemaking process—both with the NPRM (Notice of Proposed Rulemaking), which is due out later this year, and the SNPRM (Supplemental Notice of Proposed Rulemaking) for time-barred debt—it sounds like debt collection questions will be on-hold for the pilot program. Or, at least, questions that are already addressed in the proposed rules. With that said, we don’t yet know what the final rules will look like, so the pilot program might come in handy once we have those rules in hand.

The Washington State Collection Agency Board held an emergency rulemaking meeting last week where it decided to do away with branch office licensing requirements for collection agency employees working from home during the COVID-19 pandemic. As an emergency rule, it will remain active for 120 days, and can be extended for another 120 days “if the board is actively engaging in rulemaking.”

According to the agenda for the meeting (which includes the text of the rule as amended):

The purpose of the rule change is to offer licensees and their staff the ability to take precautions deemed necessary to avoid the risk of exposure to communicable illnesses and support the return of commerce in all business sectors. This rule change will provide remote working options to employees of Collection Agencies.

The proposed emergency rule comes with several requirements for the remote workforce of a collection agency. The rules include:

1. Keeping records of which employees are working remotely.
2. Remote employees must comply with all applicable laws and regulations.
3. Written IT security policies must be in place. They must outline “security protocols in place safeguarding the company and consumer data.”
4. Physical records may not be stored at remote work location.
5. Requirement of IT security policies that allow access to the company’s systems for the remote employees through a VPN or some other system that includes frequent password changes, multi-factor authentication, data encryings, and/or lockout implementation.
6. All calls made and received by remote employees must be recorded and monitored. Recordings must be maintained and made available for inspection upon request.
7. Neither the remote employee nor the company can conduct activity that implies the remote employee’s location is a licensed branch. E.g., advertising or having business cards that list the unlicensed address.

Audio of the meeting (27 minutes long) is available here. The discussion begins at around the 6-minute mark. One member of the board presented opposition to the emergency rule. He mentioned that the board has not had a chance to consider the long-term consequences of the rule, such as:

• There is no location restriction for where the employee can be location, which raises concerns of hiring call center employees from outside the United States.
• The proposed rule doesn’t go far enough in regards to protecting consumer privacy. Specifically, it contemplates that collectors would be using their home computers to access collection agency systems.
• The rule should think through ideas for monitoring remote employees before enacting the emergency rules.
• The Washington State Collection Agnecies Act was passed by the legislature, and he is not sure if the board has the authority to amend it.

Another member presented a different view. He mentioned that remote work like this is permitted in many other jurisdictions, and Washington State is behind the curve. He also mentioned that debt collectors are one of the primary sources of information for consumers about their accounts, so consumers would be losing an important resource if collection agencies cannot function during the COVID-19 pandemic.

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insideARM Perspective

What to do with branch licensing requirements for residences of remote employees has been a hot topic lately in states that have such requirements. The pandemic—and the ensuing stay-at-home orders that dropped one after the other in March and April—forced many agencies to move their agents to remote work. Some of the concerns raised are already put in place, at least at the larger agencies. For example, most large agencies purchased and sent their agents home with company equiment to prevent them from working on personal equipment. 

One big concern raised for the industry about branch office licensing of remote workers’ reisdences is safety. Unless there is certainty that the agents’ addresses will remain confidential (including safe from public access requests), it could put them at risk of harm. I think many lawmakers and regulators would be astounded at the types of threats that collectors receive from consumers. 

Washington now joins other states, like Connecticut, in waiving—at least temporarily—branch office licensing requirements. Other states, like Illinois, continue to require at least the addresses of their agents to be sent in.

Connecticut has yet again extended its no-action policy regarding debt collectors working from home. Back in March, the Banking Commissioner first issued its policy, which relaxed the branch office licensing requirement for debt collectors who are working remotely due to the COVID-19 pandemic. The policy was extended twice already, this is the third extension. The no-action policy is now in place through August 31, 2020.

On a related note, read this about Washington’s emergency rule.

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This video is part of the iA Think Differently series. Written by or recorded with members of the iA Innovation Council, the series showcases thought leadership in analytics, communications, payments, and compliance technology for the accounts receivable management industry.

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Today I’m talking with Ed Bills, Chief Operating Officer of PDC Flow, an API-driven technology platform that facilitates electronic payments, signatures, and document delivery.  Their focus is to push transactions to be completed by the consumer versus an agent taking information over the phone and typing it into the system. The idea is to create the most convenient experience possible for consumers and to remove as much risk as possible of errors or privacy violations from clients. This issue has been brought front and center by the need to have agents working from home for the last several months, and the desire to have agents at home in the future.

[Editor’s note: If you are interested in topics like strategy, testing and scenario planning, you should not miss insideARM’s next conference, iA Strategy & Tech – a completely virtual event – July 21-23. It’s a masterclass in collections strategy.] 

Transcript

The iA Innovation Council is a collaborative working group of product, tech, strategy, and operations thought leaders at the forefront of analytics, communications, payments, and compliance technology. Group members meet in person (and lately, virtually) several times each year to engage in substantive dialogue and whiteboard sessions with the creative thinkers behind the latest innovations for the industry, the regulators who audit and establish guardrails for new technology, and educators, entrepreneurs and innovators from outside the industry who inspire different thinking. 

2020 members include:

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MOUNT LAUREL, N.J. — Ceteris is pleased to welcome General Counsel, Daniel J. McCusker, to the company.  With more than 20 years in ARM leadership roles in legal and compliance within the collection industry, private sector and law firm arenas, Ceteris is confident that Dan’s expertise will make an immediate impact.  Dan’s high energy, positive attitude, and professionalism combined with his diverse knowledge and record of successes pairs perfectly with the Ceteris vision and values.

Jonathan Pike, CEO of Ceteris, said, “We are excited to welcome Dan to Ceteris as our new General Counsel and as a member of our Executive Team.  Dan brings a wealth of experience in all facets of legal and compliance plus executive management that will assist us in meeting our aggressive goals and initiatives.  Dan’s background in building legal networks, debt acquisitions and new lines of servicing businesses demonstrates our commitment to broadening the suite of services we offer our customers. Furthermore, Ceteris is quickly expanding to provide end-to end services at the forefront of our business model.”

Throughout his career Dan has worked with customers that include some of the top credit issuers, financial institutions, debt buyers, and a myriad of commercial entities. He holds a bachelor’s degree in Government & Politics from Widener University, and a Juris Doctorate from Roger Williams University School of Law.

About Ceteris Portfolio Services, LLC

Ceteris is a nationally licensed servicing company providing debt recovery solutions and other related services for consumers and commercial businesses across a broad range of financial assets.   Ceteris provides first- and third-party revenue cycle management, business process outsourcing and portfolio backup servicing to heavily regulated, high volume industries including banking, automotive finance, credit card, equipment leasing, medical, telecommunications, utilities, retail and other industries.  For more information please visit www.ceterisholdco.com/CPS.

The CARES Act, which includes—among many other things—modifications to credit reporting requirements for data furnishers during the pendency of the pandemic, caused a bit of confusion. On Tuesday, the Consumer Financial Protection Bureau (CFPB) aimed to clear some of that confusion up by releasing an FAQ on the topic of credit reporting during COVID-19.

The seven-page document covers 10 questions on the topic. Many of the questions deal with the CFPB’s policy statement outlining its supervisory and enforcement practices related to the pandemic, which was issued in early April. Below are summaries of the questions and answers.

Furnishers should pay special attention to FAQ 8, which details that reporting a disaster code does not meet the compliance requirements of the CARES Act.

Editor’s Note: While we provide the summaries below, we also encourage our readers to read the FAQs in full due to the sensitive nature of this topic.

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Question 1: What did the CFPB’s statement on consumer reporting—issued shortly after the CARES Act was enacted—say?

The CFPB noted that it expected furnishers to comply with the CARES Act, specifically related to the requirements on how to report accounts that were not delinquent prior to COVID-19. The CFPB also indicated that it would consider the individual circumstances of the credit reporting agencies and furnishers when evaluating compliance with requirements to investigate disputes in specific timeframes. The CFPB will be looking to see if the organization made good faith efforts to investigate disputes as quickly as possible. If the organization did not face any “impediments due to COVID-19,” then the normal timeframe applies.

Question 2: What did the CFPB’s statement say about enforcement of the requirement to report as current certain accounts for consumers impacted by COVID-19?

The CFPB states that it expects compliance with the FCRA and the CARES Act, and it “remains committed to vigorously enforcing” applicable laws. The CFPB then reiterates that it will review the specific circumstances of an organization and determine whether the organization made a good faith effort to comply as quickly as possible.

Question 3: What did the CFPB’s statement say about citing and suing furnishers for failure to investigate disputes within specific timeframes?

The CFPB states that it will provide some flexibility with timeframes based on the individual circumstances of the organization, acknowledging that—just like so many other businesses—furnishers faced operational and business challenges during the pandemic. However, the CFPB clarifies:

Statement did not say that the Bureau would give furnishers or consumer reporting agencies an unlimited time beyond the statutory deadlines to investigate disputes before the Bureau would take supervisory or enforcement action. Furnishers and consumer reporting agencies remain responsible for conducting reasonable investigations of consumer disputes in a timely fashion.

Question 4: The CARES Act calls for accommodations to pandemic-impacted consumers—what is an accommodation in this context?

The CFPB defines this as any payment assistance or relief granted to pandemic-impacted consumers during the pandemic. The time frame includes from January 31, 2020, until 120 days after the termination of the national emergency. The CFPB provides examples, such as agreements to defer payments, make partial payments, forbearances, or loan modifications.

Question 5: Are furnishers required to provide accommodations to pandemic-impacted consumers?

The CARES Act requires certain accommodations for two types of loans: mortgages and Federally held student loans. Even if no accommodation is required, the CFPB encourages furnishers to work with borrowers.

Question 6: What are a furnisher’s reporting obligations if it provides an accommodation?

This answer is broken down depending on the scenario:

• If the account was current prior to the accommodation, then the furnisher must continue to report the account as current.
• If the account was delinquent prior to the accommodation, the furnisher cannot advance the delinquent status during the accommodation.
• If the consumer brings the account current during the accommodation, then the furnisher must report it as current.

Question 7: What should furnishers consider when reporting accounts?

The CFPB urges furnishers to look at the information they are reporting for the consumer as a whole. The following example is provided:

[I]nformation a furnisher provides about an account’s payment status, scheduled monthly payment, and the amount past due may all need to be updated to accurately reflect that a consumer’s account is current consistent with the CARES Act. Furnishers are encouraged to ensure they understand the data fields that the consumer reporting agencies to whom they report utilize and which standard data reporting formats may apply.

Question 8: Can furnishers comply with accommodation reporting requirements by using a special comment code, such as a natural or declared disaster or forbearance?

Reporting a disaster or forbearance code does not meet the CARES Act requirement. The CARES Act requires that the account remain current if it was current prior to the accommodation, or not to advance the delinquency if it was delinquent prior to the accommodation. Disaster or forbearance codes do not meet this standard.

Question 9: Can a furnisher report all of the consumer’s accounts as in forbearance?

Since the FCRA requires accuracy and integrity in the information reported, the CFPB states that furnishers should not lump accounts together like this.

Question 10: What must furnishers report when the accommodation ends?

The furnisher cannot report an account as delinquent after the accommodation ends if the consumer met his or her requirements during the accommodation period. Also, “[a] furnisher also cannot advance the delinquency of a consumer that was maintained pursuant to the CARES Act based on the time period covered by the accommodation after the accommodation ends.”

Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved.

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While we all await word of SCOTUS (hopefully) striking down the TCPA in the very near future, I bring word of an interesting case analyzing the definition of the word “system” in the TCPA—an often-overlooked part of the statute’s Sphyxian ATDS formulation.

The case is Panzarella v. Solutions, CIVIL ACTION NO. 18-3735, 2020 U.S. Dist. LEXIS 104746 (E.D. Pa. June 16, 2020) and be careful what you may be hearing about the case from other sources—it is way more important than people are making it out to be. (Just let me go first folks.)

Indeed, Panzarella is a case that almost ended the entire TCPAWorld as we know it (!) and it contains a very important take away for folks trying to manage TCPA risk (which is everyone reading this article). 

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Starting at the beginning, the TCPA governs automated telephone dialing systems, which are defined as “equipment” with the capacity to do… something. The precise functionalities required of an ATDS are the subject of endless debate but do not really play into Panzarella. Rather the issue there is what constitutes a dialing “system” to begin with? Or, perhaps better construed, what is the logical end to integrated components of “equipment” essential to a system placing a call and—if the “equipment” won’t function without those components—how can it be considered dialing equipment at all?

Ship of Theseus anyone?

In Panzerlla the Plaintiff argued that the Plaintiff’s dialer just can’t work without an attached database management system which—for whatever reason—has the ability to randomly generate phone numbers. Since the ability to randomly generate and dial numbers is the Holy Grail of TCPA application, the Plaintiff figures they have a sure thing—the “system” has the capacity to generate numbers and dial them. So, the argument goes, the system is an ATDS subject to the TCPA.

While I hate the argument, it actually isn’t terrible. In fact, it’s pretty good. We’ve seen courts stretch the definition of “system” much farther—for instance to encompass multiple cloud-based dialer domains that operate completely differently merely because they were accessible on a single computer. Eesh.

On the other hand we’ve seen courts refuse to deem a dialer capable of random dialing merely because an excel spreadsheet might be used to generate random numbers and all computers these days have an excel program icon on their desktop.

But Ponzarella’s argument was more than that Defendant’s system can make use of random numbers generated on a program available on the computer, it was that Defendant’s system must make use of a program that itself can separately, but non-essentially, generate such numbers.  So this is a bit of a tweener—this is the first case where a Plaintiff has argued that an essential component of a dialing system can undeniably perform a non-essential but statutorily-identified function: the ability to randomly generate numbers.

Interesting stuff.

The Court didn’t really take the issue head on, however, and elected instead to reject the first premise of Plainiff’s argument—that the database management system was part of the dialing “system” to begin with. And that ruling has big consequences. First, here’s the critical language:

Based on the record presented, the Court finds that the SQL server is distinct from the ININ dialing system.

Since the “system” making the calls—ININ—was distinct from the component that could generate numbers– the SQL server—the “system” could not perform the enumerated ATDS functions.

Cool. But why does the Court conclude SQL isn’t part of ININ if ININ can’t place calls without SQL’s help?

Interestingly the Court’s reasoning is based on the same basic premise underlying ACA Int’l rejection of the old 2015 TCPA Omnibus ruling—it must be so, because any other interpretation would render the application of the TCPA too expansive.

Everyone (hyperbole) uses SQL database technology. SQL serves as the back-end for a huge number of systems of record that, in turn, feed dialers. So if Plaintiff’s argument were accepted every one of those systems would qualify as an ATDS. And that—says the Panzrealla court—would render the TCPA far too expansive and far too broad.

I mean, if that were the case, then the mere storage of numbers in a database to be fed to a dialer to be automatically called would almost always trigger the TCPA. And that can’t be right.

See the trick folks?

My most sophisticated readers are smiling right now (I see you.) The Panzrealla Plaintiff’s argument essentially sought to harmonize Marks with Gadelhak by recognizing that the world’s most oft-used database management system has the ability (for some strange reason) to randomly or sequentially generate numbers. So, in essence, every system that can store (in a database) and dial numbers automatically would become an ATDS under either Marks or Gadelhak. It would have rendered the distinction in statutory ATDS interpretation meaningless as a practical matter and Marks would—in essence—have been the law wherever the argument was accepted.

Yikes.

Well we can thank the Panzrealla court for knocking that train off its TCPAWorld-ending tracks. Please don’t miss the importance of this one folks. If you see a “the-dialer-system-ncludes-the-database” argument keep this case handy!

One other critical take away here—pay attention to this one too—the SQL server was housed on different physical servers from the dialing software servers. Super important to the outcome here.

I know every single tech person out there is rolling their eyes saying “so what?” So this—normal people think that software programs residing in different metal cages are different systems even if they are connected through wires and are really no different than sequestration in virtual server environments in your techie brain. No but seriously—this stuff can make a world of difference and in Panzrella it probably resulted in the Defendant winning summary judgment. Here’s proof:

The database server being housed in separate hardware suggests that it should be considered a distinct system.

Notice that this ruling was made at the summary judgment stage, meaning that the court found–as a matter of law–that no reasonable juror could have concluded SQL was part of this dialing system. Would the court have still reached that conclusion if all the software components were sitting on a single Blade? Hmmmm….

Think of this as social distancing for your software components. (Too soon?) 

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AKRON, Ohio — Debt Sales Partners announced today that its website which initially launched over twenty years ago has been completely updated and is now live at www.debtsales.us.

 “Twenty-years ago our proprietary software drove the first 100% Internet based sale and it was groundbreaking for our industry. Technology has certainly evolved since then and we wanted to make sure we continued to stay ahead of the curve with our updated platform,”  said Debt Sales Partners President and founder, Michael Zoldan.

The website now details the expanded range of services Debt Sales Partners offers the industry. Over the past twenty years Debt Sales Partners or “DSP” has worked directly with buyers and sellers to identify additional needs for the receivables management business.  

After successfully entering the brokerage business, DSP developed a strategy of identifying ways to tailor existing services to each client’s unique needs. “Our complete suite of services is now detailed at our redesigned website making it easier to see what we can do and how we can partner for success,” concluded Zoldan.

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About Debt Sales Partners

Debt Sales Partners based in Akron, Ohio provides brokerage, data scrubbing and many other ancillary services to the Receivables Management industry at www.debtsales.us. The nation’s largest creditors and debt buyers have relied on their technology since 1999.

Yesterday, several consumer advocate groups sued the Consumer Financial Protection Bureau (CFPB) and Director Kathy Kraninger about the CFPB’s Taskforce assigned to review consumer financial laws and provide recommendations for improvement to the Director. According to the consumer advocates—including the National Association of Consumer Advocactes, the United States Public Research Group, and Kathleen Engel, who is a professor at Suffolk University—Taskforce is biased toward the industry. The lawsuit seeks to enjoin the Taskforce from continuing its work, make its records publicly-available, and to set aside its charter.

According to the 52-page complaint:

[D]espite the profound implications of the Taskforce’s work for consumer protections, Defendants have appointed to the Taskforce individuals who uniformly represent industry views. Indeed, the Chairman of the Taskforce, Todd Zywicki, believes that consumer protections are paternalistic, has argued that the CFPB is a “menace” “guarantee[d]” to manifest “bureaucratic pathologies,” and has worked on behalf of several large financial institutions to influence the Bureau and other agencies. All of his fellow Taskforce members have either expressed similar views or continue to work as industry consultants or lawyers.

The complaint notes the Taskforce’s lack of representation from consumer advocates should cause concern, as they will result in biased recommendations:

In the absence of any consumer representation on the Taskforce, and without the legally required public participation and transparency, consumer advocates and consumer finance law experts like Plaintiffs have been unable to participate in or follow along with the Taskforce’s work. These flagrant and ongoing violations continue to injure Plaintiffs and are of great concern, as the Taskforce has already begun working towards producing a final report due in January 2021.

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The consumer advocates argue that the biased composition of the Taskforce violate the Federal Advisory Committee Act (FACA), which, according to the complaint, “is a “sunshine law” designed to prevent special interest groups from exerting undue influence over the Executive Branch by using their membership on advisory committees to promote their private concerns.”

The Taskforce was initially announced back in October 2019, when the CFPB put a call out for applications for experts in the field. The Taskforce members were announced in January 2020, including the announcement that Zywicki would chair the group. In March, the Taskforce requested input through a Request for Information to help focus its mission. 

The U.S. Court of Appeals for the District of Columbia Circuit recently vacated a summary judgment order against a debtor on her claims against a debt owner and its debt collector for alleged violations of the federal Fair Debt Collection Practices Act because the debtor did not suffer a concrete injury-in-fact traceable to the alleged statutory violations and therefore lacked the required Article III standing.

A copy of the opinion in Frank v. Autovest, LLC is available here. 

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In May 2011, a consumer obtained financing to purchase a used car from a dealer.  The dealer immediately assigned its interest in the borrower’s financing agreement to an automobile finance company.  The borrower defaulted on the financing agreement and voluntarily surrendered her car to the finance company.

The debt owner subsequently acquired the debt from the finance company. The debt owner retained a debt collector which sent two letters to the debtor indicating that the debt owner had purchased the debt and requiring that the debtor make all future payments to the debt collector.

The debt collector sued the debtor in the Superior Court for the District of Columbia to collect the debt. The complaint attached a sworn “Verification of Complaint” and the debt collector’s counsel later filed affidavits in support of their fees and costs, including documenting that their fees were contingent upon recovery. The Superior Court initially defaulted the debtor, but later vacated the default after the debtor filed a motion and paid a $20 fee. 

After the debtor retained counsel, the debt collector dismissed its case against the borrower with prejudice.

The debtor then filed a putative class action in federal court against the debt owner and debt collector alleging that the affidavits filed in support of the debt collection suit contained “false, deceptive, or misleading representations” in violation of 15 U.S.C. section 1692e of the FDCPA, that the affidavits were designed to “harass, oppress, or abuse” the debtor in violation of section 1692d, and that this “unfair or unconscionable” debt-collection practice violated the FDCPA under section 1692f.  The debtor also claimed that the debt collector violated all these provisions of the FDCPA “by attempting to collect contractually unauthorized contingency fees.”

The debtor testified at her deposition that she “was being scammed” in the debt collection suit because she had “never heard” of the debt collector.  The debtor admitted that she did not take any action or “refrain from doing anything” because of the affidavits.  She also admitted she did not make any payments to the debt collector because of the affidavits.

The federal trial court granted the debt owner and debt collector’s motions for summary judgment finding that any misstatements in the affidavits were not actionable because they were immaterial and did not affect the borrower’s “ability to respond or to dispute the debt.”

This appeal followed.

Although the trial court did not examine the debtor’s standing, the D.C. Circuit began its analysis by evaluating standing because it has “an independent obligation to assure that standing exists.” Article III requires that a plaintiff have “a concrete and particularized injury-in-fact traceable to the defendant’s conduct and redressable by a favorable judicial order” for standing to exist.  When opposing summary judgment, a “plaintiff must demonstrate standing by affidavit or other evidence.”

Here, the D.C. Circuit held that the debtor failed to meet her burden because she did not “identify a concrete personal injury traceable to the false representations” in the affidavits.  To the contrary, her testimony established “that she neither took nor failed to take any action because of these statements.”  She also did not testify that the affidavits “confused, misled, or harmed” her. 

Although the debtor claimed that the lawsuit stressed and inconvenienced her, the debtor “never connected those general harms to the affidavits,” as required to confer Article III standing on her alleged FDCPA claims.

The D.C. Circuit rejected the debtor’s argument that the “court costs and attorney’s fees” that she incurred in defense of the suit were sufficient to establish standing because “the record contains no evidence linking these expenses to the alleged statutory violations.”

The debtor also argued that she suffered an informational injury sufficient to establish standing because the debt collector and the debt owner denied her “access to truthful information.” To demonstrate a cognizable informational injury a plaintiff must prove that she “1) has been deprived of information that, on her interpretation, a statute requires a third party to disclose, and (2) suffers, by being denied access to that information, the type of harm Congress sought to prevent by requiring disclosure.”

Here, the D.C. Circuit determined that the borrower could not satisfy the second requirement because her testimony established no “detrimental reliance—or any other harm—based on the misrepresentations in the . . . affidavits.”

The debtor also argued that her claims were the type of injuries that Congress “sought to curb” with the FDCPA and that the FDCPA authorizes a private right of action. Thus, the debtor claimed that she did not have to prove “any additional harm.” 

However, as you may recall, in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Supreme Court made it clear that even for a statutory violation, “Article III standing requires a concrete injury.” Although Congress may identify and elevate an intangible harm, this “does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”  Nowhere does the FDCPA state “that every violation of the provisions implicated here—no matter how immaterial the infraction— creates a cognizable injury.”

The D.C. Circuit held that simply pointing to alleged false statements in the affidavits is  not enough to establish standing because “not all inaccuracies cause harm or present any material risk of harm.” Although a misrepresentation in a debt collector’s affidavit filed in court could cause a borrower to suffer “a concrete and particularized injury,” that was not the case here.  Thus, even if the debt collector and debt owner violated the FDCPA, the borrower lacked Article III standing.

Finally, the D.C. Circuit examined the debtor’s argument that her subjective response to the affidavits was immaterial, because the proper inquiry is the “affidavits’ likely effect on a hypothetical unsophisticated debtor.”

The Court rejected this argument because it confused “standing with the merits.” Although the “unsophisticated consumer (or in some courts, the least sophisticated consumer)” is the correct substantive standard that courts use to evaluate the borrower’s FDCPA claims, this does not relieve a consumer from the threshold requirement “to establish Article III standing—including a concrete and particularized injury-in-fact.” This is because, as broad as Congress’s powers are to “to define and create injuries,” Congress “cannot override constitutional limits.”

Thus, the D.C. Circuit vacated the trial court’s summary judgment order and remanded the case to be dismissed for lack of jurisdiction.

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