The Fair Debt Collection Practices Act was originally passed to curb abusive and deceptive conduct on the part of debt collectors. But in practice, the FDCPA has become a tool used by enterprising consumer-credit attorneys to collect legal fees for technical violations, even when no actual harm occurred. That’s because the FDCPA mandates statutory damages, including attorney fees, if a violation is proven.
But as the Sixth Circuit first ruled in Hagy v. Demers & Adams, a mere technical violation isn’t always enough to state a claim under the FDCPA in federal court. In Hagy, a letter from a debt collector that contained good news—the debtor would no longer be responsible for a loan—didn’t create Article III standing even though the letter technically contained a FDCPA violation, as no injury-in-fact occurred.
Hagy was thought to be a one-off, as four months later the Sixth Circuit ruled the opposite way in Macy v. GC Services Ltd. Partnership. In Macy, the Sixth Circuit found Article III standing based on an alleged FDCPA “mini-Miranda” violation, even where no actual harm occurred, because the violation could’ve led to a greater risk of harm.
Hagy wasn’t a one-off. Recently, the Sixth Circuit again found a lack of Article III standing in Buchholz v. Meyer Njus Tanick, PA. There, the debtor alleged that the debt collector sent multiple collection letters without first having an attorney perform a “meaningful review of the underlying accounts.” The debtor argued that the letters gave rise to a FDCPA violation, even if they contained no actual errors, because they left him with the impression that an attorney made a “professional, considered” determination to send them. The letters, according to the debtor, caused him anxiety.
Assuming that the debtor alleged a plausible FDCPA violation, the Sixth Circuit couldn’t find an injury-in-fact to create standing, as (1) the debtor’s anxiety was a fear of future harm, which wasn’t certainly impending or traceable to the debt collector’s conduct, and (2) the debtor suffered no actual harm or increased risk of harm from the letters since he failed to dispute the veracity of the facts contained in them. “Not all disputes have a home in federal court,” the Sixth Circuit cautioned. Apparently, certain FDCPA claims are among the disputes that don’t.
What this means for Michigan lenders and their attorneys
Like Hagy, Buchholz shows that the Sixth Circuit has gone further than other federal circuit courts in dismissing cases that merely allege statutory violations without something more. Buchholz also delineates where the Sixth Circuit has drawn the line—actual harm or a risk of “certainly impending” harm creates standing, whereas speculative future harm or no risk of harm doesn’t. Whether Buchholz will lead to more dismissals, or perhaps more artfully-drafted complaints, remains to be seen.