The United States District Court for the Northern District of Illinois has recently issued several decisions unfavorable to debt collectors, including McMahon v. LVNV Funding, LLC, 12 C 1410, 2018 WL 1316736 (N.D. Ill. Mar. 14, 2018) and Pierre v. Midland Credit Management, Inc., 1:16-cv-02895, 2018 723278 (N.D. Ill. Feb. 5, 2018). On May 2, 2018, the Seventh Circuit Court of Appeals followed suit in Evans v. Portfolio Recovery Associates, LLC, 17-1773, 17-1860, 17-1866, 17-2622, 17-2756, 18-1374, 2018 WL 2035315 (7th Cir. May 2, 2018).
Evans was a consolidated appeal of four district court decisions granting summary judgment to consumers on their Fair Debt Collection Practices Act (FDCPA) claims. In each case, the consumer defaulted on credit card debt, Portfolio Recovery Associates (PRA) purchased the debt, and PRA sent a debt validation letter to the consumer. Each consumer sought advice from Debtors Legal Clinic (DLC), and a DLC attorney faxed PRA separate letters stating:
This letter is concerning the above referenced debt.
Debtors Legal Clinic is a non-profit legal services organization that advises senior citizens, veterans, and low-income individuals whose income is protected by law of their rights under various state and federal statutes. Our clinic represents the above referenced client for purposes of enforcing their rights pursuant to all applicable debt collection laws.
This client regrets not being able to pay, however, at this time they are insolvent, as their monthly expenses exceed the amount of income they receive, and the amount reported is not accurate. If their circumstances should change, we will be in touch.
Our office represents this client with respect to any and all debts you seek to collect, now or in the future, until notified otherwise by our office. As legal representative for this client, all communication must be through our office, please do not contact them directly.
If you wish to discuss this matter, please contact our office directly at [phone number] to speak with the attorney assigned to the matter, Andrew Finko.
PRA admitted to receiving and reviewing the letters, but when reporting to the consumer reporting agencies (CRAs) it did not denote the debts as disputed. PRA did not denote the debts as disputed because, given the language and context of the letters, it did not consider the letters to dispute the validity of the debt.
In each of the four cases, the district court judge granted summary judgment to the consumers. The Seventh Circuit consolidated the cases for a single appeal, addressing four issues: (1) the consumers’ Article III standing; (2) whether the letters disputed the debt per §1692e(8) of the FDCPA; (3) whether any FDCPA violation was material; and (4) whether PRA had a bona fide error defense.
Analysis: The Seventh Circuit Affirms
1. The consumers have Article III standing because the FDCPA violation created a “real risk of financial harm.”
The Seventh Circuit began its analysis with the Article III standing arguments. PRA relied on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) and argued that the consumers were not harmed by the FDCPA violation and thus lacked standing under Article III.
Following the recent trend, the Seventh Circuit rejected that argument...
