Concrete Harm Needed in FDCPA

The United States Court of Appeals for the Sixth Circuit recently held that a procedural violation of the Fair Debt Collection Practices Act (“FDCPA”) does not, on its own, show an injury-in-fact necessary to establish standing. Buchholz v. Meyer Njus Tanick, PA, 946 F.3d 855 (6th Cir. 2020).

In Buchholz, a consumer received two letters from a law firm regarding debts he owed to a bank. The letters appeared on the firm’s letterhead and were signed by an attorney employed at that firm, and informed the consumer that the firm was acting as a debt collector with instructions for him about either challenging or paying the debt. The consumer stated in his complaint that the letters were formulaic and identical except for the specific account information referenced. While the letters did not threaten any legal action, the consumer claimed he experienced anxiety that he would be sued if he did not make prompt payment. The consumer then consulted an attorney regarding the letters, and subsequently brought suit alleging the firm violated 15 U.S.C. 1692e, e(3), and e(10) of the FDCPA. The consumer alleged the firms actions violated the FDCPA because since only one Michigan-based attorney worked at the firm, it was unlikely that there was meaningful review of his account when considering the high volume of collection cases the firm handled, but the letters gave the impression that an attorney had reviewed the file and made a meaningful, professional determination regarding his account.  

In reaching its decision, the court began with discussion of Article III and how the federal court only has jurisdiction to decide actual cases and controversies. To have a case or controversy, the plaintiff has the burden of establishing standing to bring such an action, the elements of which are (1) injury in fact, (2) that injury is traceable to the at issue conduct of the defendant, and (3) the injury can likely be redressed by a favorable judicial decision. Buchholz at 861. The first element of injury-in-fact must also be concrete and particularized, and actual or imminent. Id citing Lujan v. Defs. Of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992).  

The dispute in Buchholz was whether the injury met the requirement of being concrete to find an injury in fact. To answer this issue, the court relied on Spokeo, Inc. v. Robins for determining what constitutes an injury in fact and what limitations apply to such a finding. Buchholz at 861; Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). While the court recognizes that intangible injuries can satisfy the concreteness requirement, there are limitations on what allegations will suffice. Buchholz at 861, 862. The court then refers to several cases in which general psychological or emotional harm is not sufficient for establishing injury-in-fact for standing. Id. The cases that the court refers to in which emotional distress was sufficiently pled generally involved some specific threatening action on the part of the collector, but not from general anxiety. Id at 862. Additionally, the court recognizes that intangible concrete injuries might come from statutory violations, but that this also is subject to limitations. Id.

While it is within Congress’s power to create procedural rights that provide causes of actions, Congress cannot expand into judicial power beyond Article III and provide a plaintiff standing where the plaintiff has not suffered an injury in fact. Id. Specifically, the court uses Spokeo to articulate that not all procedural violations of the FDCPA qualify as an injury in fact, holding that violations of the FDCPA may very well result in no harm at all. Id at 874. To qualify as an injury in fact, the violation must create a real risk of harm, and only in those cases of real risk is only an allegation of violation enough to establish the requisite injury. Id at 862.

In this case, the court stated that in accordance with Spokeo the consumer had to either establish the violation caused him real concrete harm, or that the violation created a risk of harm that the FDCPA was intended to prevent. Id at 863. The consumer failed under both accounts. First, his allegation of anxiety was not on its own enough to qualify as a concrete injury because his anxiety came from a fear of being sued if he did not pay his debts. Id at 863, 864. This made the consumer the cause of his own anxiety because he did not dispute that he owed the debt, so his fear came from his own decision not to pay. Id at 865. Additionally, in dicta, the court states this consumer’s claim would have also been dismissed on additional pleading failures; namely, that his claim of anxiety regarding possibly facing legal action is essentially a fear of a future harm, which is generally not a cognizable injury.  Id at 860. Second applying congressional intent and recent FDCPA holdings, the court held that FDCPA violations do not per se create an injury-in-fact, and that the particulars of each case must be considered. Id at 868. Here, the debtor failed allege he did not actually owe the debt in question, so the court held he had not alleged any harm at all, let alone a harm the FDCPA is supposed to prevent or that the common law has recognized. Id at 870. As a result, the court held that the plaintiff failed to establish standing to bring a case against the collection firm for an FDCPA violation, as the plaintiff could not allege only a procedural violation without also alleging some concrete harm and satisfy the injury in fact requirement. Id.

In his concurring opinion in part and in judgement, Circuit Judge Murphy agreed with the majority that the consumer did not sufficiently allege his anxiety was caused by the conduct of the firm and that a violation of the FDCPA does not automatically create standing; however, he distinguished his concurrence from the majority by stating concretely that mental harm could create a “Case” or “Controversy” under Article III of the Constitution. Id at 871.

As a result of this holding, debtors alleging FDCPA violations cannot rely solely on certain procedural violations occurring to establish standing in their case without alleging some real, concrete injury. Thus, if a consumer attempts to bring suit for an FDCPA procedural violation, collectors can cite to Buchholz for dismissal on the grounds that the consumer has failed to establish standing through failure to allege an injury in fact. The dicta of this case also implies that anxiety alone is not enough to establish an injury in fact, but Judge Murphy’s concurrence states directly that a mental harm could potentially be enough to create standing.

Compliance with the FDCPA is still vitally important for creditors and debt collectors, as it helps it facilitate safe and reasonable communication with consumers. Ensuring that collection efforts follow the FDCPA is the best way to attempt collection on a debt without the risk of causing real harm and injury to the consumer.

The Full Text of the Buchholz Opinion Can Be Found HERE

Special Thanks to Erin Legg for her contributions to this article.  Erin is a law clerk with Slovin & Associates and 3rd year law student at the University of Cincinnati College of Law.