Mack v. Resurgent Cap. Servs., L.P., 70 F.4th 395 (7th Cir. 2023) 

The following is a case update written by the Hon. Meredith Jury (U.S. Bankruptcy Judge, C.D. CA., Ret.), analyzing a recent decision of interest:

SUMMARY

The Seventh Circuit Court of Appeals (the Court) reversed a district court decision which dismissed for lack of standing a purported class action lawsuit based on a violation of the Fair Debt Collection Practices Act (FDCPA).  Plaintiff had alleged sufficient concrete injury when a second, invalid and confusing collection letter caused her to spend a small amount of money, plus time and effort, to make a second validation request when the creditor’s servicer had failed to timely respond to her first such request.  Mack v. Resurgent Cap. Servs., L.P., 70 F.4th 395 (7th Cir. 2023).

To view the opinion, click here.

FACTS

Yvonne Mack had a US Bank credit card and knew she had an outstanding balance, but did not know the amount.  After she allegedly defaulted on the account, defendant LVNV Funding purchased the account.  LVNV used defendant Resurgent Capital Services, L.P. to service the account.  Resurgent engaged Frontline Asset Strategies, LLC to collect on the debt. In April 2018 Frontline sent a letter to Mack, informing her that the debt had been placed for collection and that she owed $7,179.87.  It listed US Bank as the original creditor and LVNV as the current creditor.  It did not describe Frontline’s relationship to either LVNV or Resurgent.  The letter did advise Mack that if she disputed the debt, she must make a validation request in writing within 30 days to Frontline, to which Frontline would respond with verification of the debt within 30 days, also in writing.  If she did not send the validation request, the creditor would assume the debt was valid.

Mack made the validation request, but not without effort and expense.  She was unemployed, taking care of sick family members, and did not have a computer in her home.  Therefore, to make the written request, she had to use public computers at the library to write and print out the letter, then go to the post office to mail it, spending about $10.00 on priority mail postage and a return receipt. 

Frontline received the letter but did not provide verification of the debt within the required 30 days.  Instead, Mack received a second collection letter, this one from Resurgent that essentially repeated the Frontline letter, again saying that if she did not make a validation request within 30 days, the creditor would assume the debt was valid.  Confused and uncertain who really owned the account, Mack again went to the library, typed and printed a letter, and mailed it from the post office, spending $3.45 on postage.  In her financial circumstance, every dollar she spent could have been used for other essential needs.

Mack never received the requested verification from Frontline, Resurgent or LVNV.  She filed a FDCPA action in the district court, requesting class certification.  The district court initially certified the class, but then, in response to a belated motion to dismiss from the defendants based on lack of Article III standing (a jurisdictional challenge that is never waived), the court dismissed the case.  Mack appealed to the Court, which reversed.

REASONING

Mack asserted that the time, effort and out-of-pocket expense she incurred by being compelled to send the second validation request were adequate to establish standing.  The Court ultimately agreed. It reviewed the now well-known elements of Article III standing established by the Supreme Court in Spokeo, Inc. v Robins, 576 U.S. 330 (2016) and Transunion LLC v. Ramirez, ___ U.S. ___, 141 S. Ct. 2190 (2021):  that a plaintiff must show that she suffered “an invasion of a legally protected interest” that was concrete and particularized, actual or imminent, and not conjectural or hypothetical.  Spokeo, 578 U.S. at 339.  Particularized means individual and personal, and concrete injury is an injury in fact that is real, not abstract, with tangible or legally cognizable intangible harms.  A mere procedural violation was not sufficient.

Mack alleged that the defendants violated 15 U.S.C. § 1692g(a) which governs the type of collection letters sent by Frontline and Resurgent.   The nearly identical language about requesting a validation within 30 days and how the creditor or servicer would respond set forth in both letters comes directly from that statute.  Section 1692g(b) specifies how the creditor or servicer must respond to the request, a response that admittedly did not occur here.  At the district court and on appeal, however, defendants asserted that Mack’s injury, though particularized to her, was not sufficient harm to be concrete.  The admitted confusion of Mack which caused her to send the second request was not compensable and therefore not an injury in fact. Besides, they argued, it only happened once.

The Court rejected those arguments.  In response to the “only once” assertion, it stated “[a]n argument that the defendant harmed the plaintiff only once is not an argument that the plaintiff was not harmed.”  As to the concrete damages, the Court noted that monetary damages, no matter the amount, always qualified as an injury in fact.  Although the first expenditure of $10.00 was necessary for Mack to contest the debt, the second trip to the library to write and print the letter and the $3.45 spent to mail it were sufficient to be the necessary harm.  Finally, the Court found that this injury was fairly traceable to the actions of defendants, who sent the second letter in violation of the FDCPA.  Since the class had been dissolved upon dismissal of the action, the Court remanded to the district court to reconsider the elements of class certification to make certain it was restricted to those with a concrete harm.

AUTHOR’S COMMENTS

It strikes me that this is exactly the type of creditor/servicer abuse the FDCPA was enacted to prevent.  Yes, the damages to each potential member of the asserted class are indeed minimal.  But without this protective statute, that includes not only actual damages but also statutory damages of at least $1000 per violation, no consumer would ever challenge such abusive acts.  And I do mean abusive, even though perhaps this was just negligence on the part of Resurgent and Frontline.  But it was avoidable negligence, as following the FDCPA properly can be systematized by every collector in this era of computerization.   When a financially challenged consumer receives a dunning notice and takes the necessary steps to dispute the debt, that person should expect to receive the response promised by the statute, not a second confusing dunning letter, as happened here.  The Seventh Circuit properly ruled to prevent this type of harm being inflicted upon consumers without recourse.

This review was written by the Hon. Meredith Jury (U.S. Bankruptcy Judge, C.D. CA., Ret.). Thomson Reuters holds the copyright to these materials and has permitted the Insolvency Law Committee to reprint them. This material may not be further transmitted without the consent of Thomson Reuters.