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Standing - When the FDCPA and FCRA Collide

  • Written by Steel Rose

The Fair Debt Collection Practices Act (“FDCPA”) is a significant piece of legislation. It has regulated “debt collectors,” as defined by statute, for over 40 years. Recently, the Consumer Financial Protection Bureau issued a new rule implementing the statute’s enforcement (for CPW’s prior coverage, check out here and here). Despite these significant developments, however, a recent opinion reminds us of one significant shortcoming concerning the FDCPA: the Supreme Court has never addressed standing under the statute. In the absence of precedent from the nation’s highest court, this recent opinion highlights a common standing analysis performed by courts faced with standing issues under FDCPA claims. Read on to learn more.

In Salermo v. Watters, No. 19-cv-02791, 2021 U.S. Dist. LEXIS 16169 (S.D. Tex. Jan. 28, 2021), the court granted in part and denied in part a motion to dismiss several FDCPA claims. The plaintiff received a loan from a credit union that she intended to use to repay credit card debt. The defendant, a law firm allegedly retained by the credit union to collect on the loan, sent the plaintiff a signed debt collection letter (the “Letter”) on its letterhead. The defendant’s signature and its letterhead were at the heart of the plaintiff’s two main arguments.

First, the plaintiff argued that the letterhead and signature violated the FDCPA because it implied that an attorney had reviewed her case and drafted the letter. The plaintiff argued that this violated the FDCPA’s restriction on debt collectors from using “any false, deceptive, or misleading representation”. This included falsely representing any communication is from an attorney or using “false representation or deceptive means” to collect or attempt to collect a debt. The plaintiff alleged the letterhead and signature caused her to become “upset and frightened” because they implied that an attorney had reviewed her case and drafted the letter.

Second, the plaintiff also argued that the Letter deceived her concerning the validity of her debt. The Letter stated that the debt “will be presumed to be valid” if the plaintiff failed to dispute it within a period of time. In reference to who or what would consider the debt to be “valid,” the plaintiff alleged that the Letter deliberately omitted the words “by the debt collector”. This omission caused her to believe that her failure to dispute the debt would confirm the debt’s validity to parties besides the debt collector, e.g., creditors, courts, etc. The plaintiff repeated her arguments that this violated the FDCPA’s restrictions on “false, deceptive, or misleading representation” and using “false representation or deceptive means”. The plaintiff also introduced a new argument that the omission violated the FDCPA’s requirement that a debt collector notify a consumer that a failure to dispute a debt will cause the debt to be assumed valid by the debt collector.

Salermo is a good exercise in standing under FDCPA claims. The court reminded us that the Supreme Court has not addressed standing under the FDCPA. In the absence of precedent from the nation’s highest court, the court applied the Supreme Court’s decision in Spokeo Inc v Robins, 136 S. Ct. 1540 (2016), where standing under the Fair Credit Reporting Act (“FCRA”) was evaluated. The Salermo court noted that in Spokeo, alleging a statutory violation was not sufficient under the FCRA. Article III standing was also required. Applying Spokeo to the case before it, the court determined that the plaintiff had standing for its false representation claims, but found the plaintiff lacked standing for its validity of debt argument. To read more click here