District Court Opinion Highlights Effect of Spokeo on FDCPA Claims

by Smith Debnam Narron Drake Saintsing & Myers, LLP

A recent district court opinion from Michigan makes clear that statutory violations of the FDCPA do not absolve a plaintiff from the need to show a concrete injury in order to establish Article III standing.  In Johnston v. Midland Credit Mgmt, C.A. No. 1:16-cv-437, 2017 U.S. Dist. LEXIS 10610 (Jan. 26, 2017).   the complaint alleged that the consumer received a settlement letter which provided three settlement options.  The letter contained an error in that the second settlement option was not populated with a payment amount.  Instead, it indicated a blank discount percentage rate and a monthly payment amount of $0.00 due on March 25, 2016. The consumer, on the advice of counsel, contacted Midland and indicated that he would take the zero-dollar option.  When Midland advised him the letter contained an error but that the first settlement offer of a lump sum was still available, the consumer rejected the offer and stated that he only wanted the zero-dollar payment option.  Based upon the letter and Midland’s failure to honor the zero-dollar option, the plaintiff filed suit asserting that the settlement letter was false, misleading and/or deceptive under 15 U.S.S. 1692e.  Midland moved to dismiss asserting that the plaintiff failed to allege a concrete injury and that the mistaken language of the letter did not change the fact that the plaintiff owed the full amount of the debt at issue.

The court granted the motion to dismiss.  In doing so, the court considered first, whether there was a concrete injury sufficient to support jurisdiction and secondly whether the plaintiff had stated a plausible claim under Rule 12(b)(6).  Regarding the first inquiry, the court determined that no concrete injury in fact had been pled.  The court dismissed the plaintiff’s argument that he suffered actual damages because he was not able “to put the subject debt behind him for $0.00 and that other collection attempts in the future may occur”.  The court noted that the letter’s statement did not change the fact that the plaintiff owed the debt.  Moreover, the court was equally dismissive of the notion that Plaintiff incurred harm because “his receipt of the false, deceptive and misleading collection letter caused him to keep the letter and seek advice of counsel, thus incurring de minimis travel expenses, loss of time to evaluate the letter and call Midland to determine the validity of the offer, as opposed to ignoring it and throwing it in the trash.” 

Moreover, the court concluded that the plaintiff had not sufficiently stated a plausible claim under the FDCPA under the least sophisticated consumer standard.  The court pointed out that while the “standard recognizes the Act protects the gullible and the shrewd alike while simultaneously presuming a basic level of reasonableness and understanding on the part of the debtor.”  In reviewing the language at issue, the court observed that

Reviewing the letter in its entirety, the least sophisticated consumer would realize that the $0.00 payment option was an error.  First, the second option listed “OFF,” whereas the first option listed “90% OFF.”  Further, the second option indicated a first payment date of March 25, 2016. This not only shows an amount was due, but that it could be made over multiple payments which does not make sense if nothing was due.  Finally, the least sophisticated consumer would understand that giving nothing in exchange for the satisfaction of a debt is not a payment.”

Johnston at *14-15.  The decision is a positive for the debt collection industry and is reflective of the positive effects of Spokeo and the further scrutiny being placed on consumer protection complaints by courts nationwide to insure there is in fact a justiciable issue for determination.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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