DS News: Inconsistency in the Courts concerning RESPA & FDCPA

Inconsistency in the Courts

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Equal justice under the law. Carved across the front of the Supreme Court building in Washington, D.C., these words succinctly yet completely convey the duty of the U.S. Supreme Court. Its decisions, however, are then interpreted and applied by the lower federal courts. What happens when those federal courts apply a Supreme Court ruling quite differently depending on the claim? Inconsistency in the courts can certainly leave questions in its wake.

Defining Concrete

In Spokeo v. Robins, 136 S. Ct. 1540 (2016), the U.S. Supreme Court held that alleging a bare violation of a statute will no longer suffice to establish Article III standing. Even if the defendant violated a statute that provides a statutory penalty, a plaintiff will still need to show particularized and concrete harm in order to bring an action in federal court. 

But the Supreme Court left the task of figuring out what “concrete” harm may be entirely to lower federal courts. The court suggested that concrete harm does not necessarily mean tangible harm and that even the risk of harm may suffice in certain circumstances. The court further suggested that a plaintiff could be able to show a risk of harm sufficiently concrete to support standing based on a statutory violation alone where the harm alleged was based on a long-recognized common-law right (i.e., slander, libel, or the right to obtain publicly available information). 

That, however, is about where the Supreme Court stopped. With respect to the Fair Credit Reporting Act, the statute at issue in the suit, the only specific example the court provided of a published inaccuracy that would not suffice to show a risk of harm concrete enough to support standing would be an incorrect ZIP code. And even that sentence was qualified with a footnote stating the example does not apply to “other types of false information.”

RESPA vs. FDCPA

For loan servicers, the ruling, while somewhat helpful, left most questions unanswered, including what type of harm to borrowers the courts would consider concrete. The lack of guidance has led to some rather disparate results. 

One such example can be found in how the federal courts have applied Spokeo differently to two statutes very familiar to mortgage loan servicers: the Real Estate Settlement Procedures Act (RESPA) and the Fair Debt Collection Practices Act (FDCPA). Both of these statutes provide a statutory right to certain information. 

RESPA requires loan servicers to, among other things, inform borrowers if their loans transfer to new servicers and also respond to borrowers’ written requests for information about their loans. The FDCPA requires debt collectors to, among other things, inform debtors if a communication is coming from a debt collector and if it is being sent in connection with the collection of a debt.

Since both statutes confer on consumers a right to receive certain information and both permit consumers to sue if they do not receive that information, one would think the courts would apply Spokeo similarly when analyzing both statutes to either find standing or no standing to sue. But that simply hasn’t been the case. 

Proving Harm

In Dolan v. Select Portfolio Servicing, No. 03-CV-3285, 2016 U.S. Dist. LEXIS 101201 (E.D.N.Y. Aug. 2, 2016), the court held that the plaintiff lacked Article III standing to pursue claims against his loan servicer for the servicer’s alleged failure to notify him when the loan service transferred—a violation of RESPA’s sections 2605(b) and (c). The plaintiff argued, among other things, that he had standing because under his interpretation of Spokeo, “the mere violation of a statute that requires disclosure of any type of public or consumer information is sufficient to confer standing on a plaintiff who was denied access to that information.” Id. at *21 fn 7. 

The court, however, disagreed, holding that the examples of intangible, lack-of-information-type harm the Supreme Court identified in Spokeo as sufficient to confer standing “involved interests of much greater and broader significance to the public than those . . . under Section 2605 of RESPA.” Id. at *22–23. In other words, the court seemingly ruled that the public interest advanced by RESPA was simply not important enough to confer standing absent a showing of actual harm.

Standing to Sue

Most courts have come to the opposite conclusion, however, with respect to FDCPA claims. In an unpublished opinion, Church v. Accretive Health, Inc., 654 Fed. Appx. 990 (11th Cir. 2016), the 11th U.S. Circuit Court of Appeals held that the plaintiff’s “statutorily created right to information pursuant to the FDCPA” gave her standing to sue simply because she did not receive the required information. 

“Through the FDCPA,” the court explained, “Congress has created a new right—the right to receive the required disclosures in communications governed by the FDCPA—and a new injury—not receiving such disclosures.” Id. at *994. Simply not receiving the required FDCPA disclosures, according to the court, is therefore sufficiently concrete intangible harm to confer standing. 

Numerous other courts have agreed. See, e.g., Daubert v. Nra Grp., LLC, No. 3:15-CV-00718, 2016 U.S. Dist. LEXIS 105909 (M.D. Pa. Aug. 11, 2016), which found standing when the defendant mailed a collection letter displaying the barcode and account number associated with plaintiff’s debt in violation of the FDCPA. In Lane v. Bayview Loan Servicing, LLC, No. 15-C-10446, 2016 U.S. Dist. LEXIS 89258, at *3–5, 10–14 (N.D. Ill. July 11, 2016), the plaintiff established a concrete injury resulting from the defendant’s delivery of an allegedly misleading debt collection notice in violation of the FDCPA. Also see Quinn v. Specialized Loan Servicing, LLC, No. 16-C-2021, 2016 U.S. Dist. LEXIS 107299, at *8–13 (N.D. Ill. Aug. 11, 2016), which found the plaintiff’s 1692e claim alleged a sufficiently concrete injury for Article III standing. 

In Blaha v. First Nat’l Collections Bureau, Inc., No. 16-cv-2791, 2016 U.S. Dist. LEXIS 157575 (D.N.J. Nov. 10, 2016), the court agreed and then added, apparently by way of explanation, “Congress enacted the FDCPA as a result of ‘abundant evidence of the use of abusive, deceptive, and unfair debt collection practices’ and the inadequacy of existing laws and procedures designed to protect consumers . . .” and that “[t]he stated purpose of the law was to eliminate abusive debt collection practices and to promote further action to protect consumers against debt collection abuses . . .” and “[t]he right Congress sought to protect in enacting this legislation was therefore not merely procedural but substantive and of great importance.” Id. at *22–23 (Emphasis added).

Public vs. Private

So what’s the difference between RESPA and the FDCPA such that a violation of one statute confers standing with no further showing of harm while a violation of the other does not? Is it that the FDCPA is simply more important than RESPA? More useful? Do borrowers’ interactions with debt collectors require more protection than their interactions with their loan servicers? Perhaps more important, how can courts possibly decide objectively which statute is really important and which is not? 

Although absolute certainty in the law may not be attainable, surely we can do better than to base our standing jurisprudence on some amorphous scale of the statute’s relative social importance. Moreover, there is no language in Spokeo suggesting the Supreme Court ever intended for the question of standing to be analyzed in this way. Instead, the Supreme Court’s opinion suggests a completely different—and more bright-line—test that would eliminate entirely the need to weigh a statute’s relative importance when a plaintiff claims injury based on not receiving required disclosures. 

As numerous courts have correctly noted, Spokeo holds that some types of intangible harm, including not receiving information that an individual is entitled to receive, suffices to maintain an action in federal court. But the two cases the Supreme Court cited for this point—Federal Election Comm’n v. Akins, 524 U. S. 11 (1998) and Public Citizen v. Department of Justice, 491 U. S. 440 (1989)—involved a public right to information, not a private one. 

That seems a much simpler test but one that is still consistent with Spokeo: If the statute concerns public information, then it may fall within Spokeo’s definition of intangible harm sufficient to confer standing. But if the information is required to be privately disclosed, then a plaintiff should have to show some harm beyond just not having received it. 

Of course, the Supreme Court in Spokeo did not explicitly offer any such bright-line test—or any bright lines, for that matter—leaving loan servicers and litigants largely guessing what the federal courts may do next and eagerly awaiting the next time the issue finds its way to the Supreme Court. For now, referencing the existing RESPA and FDCPA cases is the best guidance until there is consistency in the courts.

About Author: Lukas Sosnicki

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Lukas Sosnicki is a litigator in the Financial Services Group in Dykema’s Los Angeles, California, office. He has extensive experience defending banks and mortgage servicers in individual and class action lawsuits across the country. He is also an appellate lawyer, having successfully represented numerous bank and servicer clients on appeal.

About Author: Madeleine Lee

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Madeleine Lee is a litigator in the Financial Services Group in Dykema’s Los Angeles, California, office. Her practice focuses on the representation of financial institutions, servicers, and trustees in lender liability, loan servicing, lienholder, and title litigation. Her consumer finance practice includes advising clients on navigating the ever-evolving landscape of complex federal and state consumer lending laws.

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