Last month, the Sixth Circuit Court of Appeals issued an opinion in Hagy v. Demers & Adams, et al. Mr. and Mrs. Hagy sued Demers & Adams, a law firm, David Demers, a lawyer with the firm, and Demers & Adams’ client, Green Tree Servicing, LLC. Mr. Demers sent two letters to the Hagys’ counsel. The first contained a deed in lieu of foreclosure for the Hagys’ signature, and the second acknowledged receipt of the executed deed and stated that the servicer would not try to collect any deficiency balance which may be due and owing after the sale of the collateral. The Hagys sued alleging a violation of the Federal Debt Collection Practices Act (FDCPA) because the letters did not say they were from a debt collector, and The District Court granted summary judgment in the Hagys’ favor on that basis.
On appeal, a panel of three judges on the Sixth Circuit acknowledged that it would be easy to conclude that the Hagys had standing to bring their claim because their complaint included allegations that Demers owed a duty established by the FDCPA; the letter did not include the required disclosure; and the Hagys sought statutory damages. However, this was not a usual case because Demers challenged Congress’s authority to create this injury—an injury that involves no harm that could satisfy Article III’s injury-in-fact requirements.
The Court cited the Supreme Court’s 2016 Spokeo decision for the principle that the Hagys needed to point to some harm other than a bare procedural violation because “[n]ot all procedural violations, even inaccuracies, cause real harm.” The Court acknowledged that the FDCPA protects consumers from abusive debt collectors and that the disclosure requirement serves that purpose, but the Hagys failed to even try to show that they suffered any actual harm, such as a risk of double payment, anxiety, or any concrete harm. Rather, the letters helped the Hagys. The Court said, “Although Congress may ‘elevate’ harms that ‘exist’ in the real world before Congress recognized them to actionable legal status, it may not simply enact an injury into existence, using its lawmaking power to transform something that is not remotely harmful into something that is.”
While the Court recognized that Congress has some leeway to define injuries, it also said, “Congressional leeway cannot mean judicial abdication.” The Court noted that Congress does not have a general police power, so Congress “may not say that anything is an injury, and by saying so expect the federal courts to agree. Just as there must be some limits on Congress’s power to regulate commerce, there must be some limits on Congress’s power to create injuries in fact suitable for judicial resolution.” Thus, the Court dismissed the FDCPA claim for lack of standing because the plaintiffs suffered no harm.
In the second case, the U.S. District Court for the Northern District of Illinois granted a motion to dismiss an FDCPA claim because a collection agency’s letter did not include a false, misleading, or deceptive statement. The letter in question itemized the balance due at charge-off, interest, other charges, and payments made to arrive at a total current balance. The plaintiff sued, claiming that the inclusion of line items for interest and charges deceived him, making him think that interest and charges would accrue on the debt if he did not pay.
The Court said that the letter only itemized the components of the debt and explicitly showed that the balance did not include interest or other charges. “To find otherwise places debt collectors between a rock and a hard place, where they cannot simply list the amount owed, for fear of being misleading, but likewise, cannot breakdown the amount into categories either, for fear of being misleading. Debt collectors would be damned if they do and damned if they don’t.” The Court then dismissed the FDCPA claim.
These two cases are the latest to be added to a growing body of case law where courts recognize that the FDCPA has largely met its goals and that plaintiffs often require hyper-technical compliance with the FDCPA and that there are limits to how far plaintiffs can push the FDCPA’s requirements.