The Third Circuit Court of Appeals recently affirmed the district court’s decision to dismiss a putative class action against a collection company on the grounds that the plaintiff lacked standing to sue under the Fair Debt Collection Practices Act (FDCPA).
Plaintiff defaulted on the terms of a financial obligation, which was referred to a collection agency to collect on the debt post-judgment. Pursuant to the FDCPA, the collection agency sent the plaintiff a debt collection letter in connection with the post-judgment collection of the debt. Plaintiff, in turn, filed suit on behalf of herself and a putative class, and alleged that the letter misrepresented that the financial obligation allowed for post-judgment interest, and the collection agency’s representations were deceptive because the letter implied that the obligation was accruing post-judgment interest. The defendant moved to dismiss, arguing, among other things, that the plaintiff failed to establish a concrete injury-in-fact and, therefore, lacked standing to sue. The district court agreed and dismissed the lawsuit. The plaintiff then appealed, and the Third Circuit affirmed.
The Third Circuit noted that, under the FDCPA, a debt collection letter containing false and misleading information is typically sufficient to confer standing, as it is analogous to a common law fraud claim. However, to establish Article III standing in this context, the plaintiff must also allege some form of detrimental reliance on the representations made by a defendant in a collection letter.
Here, the plaintiff failed to allege that she relied on the collection agency’s representations. Moreover, there was no allegation that plaintiff suffered any financial or emotional harm as a result of the collection letter, nor were there any downstream consequences set forth in the complaint from the alleged false, deceptive, or misleading letter contents. Thus, lacking concrete harm, the plaintiff asserted only statutory violations, which were deemed insufficient to confer standing under Article III. As a result, the Third Circuit affirmed that the district court lacked subject matter jurisdiction over this action and remanded it back to state court.
Wentzell makes clear that claims brought under the FDCPA for purported misrepresentations in collection communications must also establish a concrete harm and a downstream consequence that caused an injury to the plaintiffs in order to have Article III standing.
