The U.S. Court of Appeals for the Tenth Circuit recently affirmed the dismissal of a consumer's federal Fair Debt Collection Practices Act (FDCPA) claim, holding that the consumer did not allege any concrete harm necessary for standing.
In so ruling, the Tenth Circuit:
- Agreed with the Eleventh Circuit's ruling in Hunstein v. Preferred Collection and Management Services, Inc. (Hunstein III), 48 F.4th 1236, 1240 (11th Cir. 2022) (en banc), and held that the consumer's allegations here that the debt collector disclosed her debt to its outside mailer — not the public at large nor someone likely to widely communicate her debt - were insufficient to confer standing;
- Held that the consumer's allegations that the debt collection letters at issue caused her to be confused and believe her debt was not accruing interest were insufficient because she never alleged the letters caused her to do or refrain from doing anything.
A copy of the opinion is available at: Link to Opinion
A debt collector sent three collection letters to a consumer regarding outstanding student loan debt. It used an outside mailer to send the letters. The letters did not indicate the debt balance could increase due to interest and fees from the date of the letters.
The consumer sued, alleging the improper third-party disclosure of her debt and the incomplete letters violated the FDCPA.
The trial court dismissed the consumer's complaint because it found the consumer lacked a concrete injury necessary for standing. The consumer timely appealed.
As you may recall, the FDCPA limits how debt collectors can pursue certain types of debt and creates a private right of action when they violate those limitations. See Tavernaro v. Pioneer Credit Recovery, Inc., 43 F.4th 1062, 1067 (10th Cir. 2022).
In addition, Article III of the Constitution requires a plaintiff to have standing to sue, meaning she has to incur (1) "an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016).
The injury must be concrete —- i.e., real, not abstract —- and can be either tangible (e.g., physical) or intangible (e.g., reputational). Id. at 340. The central question is "whether the asserted harm has a 'close relationship' to a harm traditionally recognized as providing a basis for a lawsuit in American courts." TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2200 (2021).
The FDCPA generally prohibits debt collectors from communicating, "in connection with the collection of any debt, with any person" without the consumer's consent or court permission. § 1692c(b). There are, however, a few exceptions such as the consumer, the consumer's attorney, and the collector's attorney. Id.
The consumer asserted here that the debt collector's third-party disclosure violated the FDCPA and injured her. She primarily relied on a close relationship with the traditional tort of public disclosure of private facts. That tort occurs when a tortfeasor gives "publicity to a matter concerning the private life of another" and "the matter publicized is of a kind that (a) would be highly offensive to a reasonable person, and (b) is not of legitimate concern to the public." Restatement (Second) of Torts § 652D (Am. L. Inst. 1977). "Publicity" means the information is conveyed "to the public at large, or to so many persons that the matter must be regarded as substantially certain to become one of public knowledge." Id. cmt. a.
However, the Tenth Circuit noted that the Eleventh Circuit recently rejected a similar argument in Hunstein v. Preferred Collection and Management Services, Inc. (Hunstein III), 48 F.4th 1236, 1240 (11th Cir. 2022) (en banc). There, the plaintiff sued after a debt collector used an outside mailer to send a collection letter. Id. The Eleventh Circuit determined that the consumer did not have standing because he failed to allege publicity and "without publicity, there is no invasion of privacy." Hunstein III, 48 F.4th at 1245. The Eleventh Circuit observed the difference between private and public disclosure "is qualitative, not quantitative." Id. at 1249.
Like the Eleventh Circuit in Hunstein, the Tenth Circuit reasoned that the consumer here failed to allege anything close to the required publicity. She only alleged that the debt collector disclosed her debt to its outside mailer — not the public at large nor someone likely to widely communicate her debt. The Tenth Circuit acknowledged that the consumer did not have to plead and prove the tort's elements to prevail, but she did need to at least allege a similar harm.
Additionally, the Tenth Circuit held that a private entity and its employees presumably knowing of her debt is not the same kind of harm as public disclosure of private facts, which is concerned with highly offensive information being widely known. See Restatement, supra, § 652D cmt. a.
In short, the Tenth Circuit concluded that the consumer did not suffer a concrete injury when the debt collector used an outside mailer.
The FDCPA also prohibits debt collectors from falsely representing "the character, amount, or legal status of any debt," § 1692e(2)(A), or use "any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer," § 1692e(10). And "[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless . . . contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing the amount of the debt." § 1692g(a)(1).
The consumer here also alleged that the debt collector violated these provisions by not truthfully informing her about her debt balance and that the balance could increase. In support, the consumer only pled that the letters were generally prejudicial to consumers and caused her to be confused and believe her debt was not accruing interest. But she never alleged the letters caused her to do or refrain from doing anything.
Thus, the Tenth Circuit held that the consumer's mere confusion and misunderstanding were insufficient to confer standing. See Pierre v. Midland Credit Mgmt., Inc., 29 F.4th 934, 939 (7th Cir. 2022). Also, the Court stated that it would be unreasonable for a debtor in the consumer's position to believe that her debt would not continue to accrue interest, absent a well-pleaded allegation to the contrary.
As a last attempt, the consumer tried to link her alleged harms to common law fraud. But the Tenth Circuit noted that fraud recognizes that harm may flow from relying on a misrepresentation, and the consumer never pleaded reliance. See Trichell v. Midland Credit Mgmt., Inc., 964 F.3d 990, 998 (11th Cir. 2020). In other words, the Court held that she did not allege the same kind of harm as required by the tort of fraud.
Accordingly, the Tenth Circuit concluded that the consumer did not plead any concrete tangible or intangible harms and, therefore, affirmed the decision of the trial court.
Ralph T. Wutscher
Maurice Wutscher LLP
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