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Tag: 3d. Cir.

Third Circuit Allows FDCPA Claim Based on Misleading IRS Language

Link: Schultz v. Midland Credit Management, Inc., Case No. 17-2244 (3d. Cir. 2018).

In Schultz, a debt collector sent letters to collect debts less than $600 to consumers that contained the following letter:

“We are not obligated to renew this offer. We will report forgiveness of debt as required by IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case.”

The district court found that as a matter of law this could not be misleading or deceptive to a consumer under See 15 U.S.C. § 1692e, and dismissed the putative class action.

The Third Circuit reversed, finding that:

Midland argues that, in order to conclude that a consumer would be misled by this statement, one would have to read the first sentence in isolation while paying no attention to the second qualifying statement—i.e., that “[r]eporting is not required every time a debt is canceled or settled, and might not be required in your case.” (App. 17). However, even with this qualifying statement, the least sophisticated debtor could be left with the impression that reporting could occur. Indeed, this is precisely what happened in the Schultzes’ case—there was no possibility of IRS reporting in light of the fact that the debt was less than $600, but use of the conditional “might” suggested that reporting was a possibility.

The Third Circuit gave a hat-tip to the Seventh in discussing what might qualify as deceptive or misleading to state a claim under 1692e:

The Seventh Circuit has held that “a dunning letter is false and misleading if it `impl[ies] that certain outcomes might befall a delinquent debtor, when legally, those outcomes cannot come to pass.'” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 367 (7th Cir. 2018) (quoting Lox v. CDA Ltd., 689 F.3d 818, 825 (7th Cir. 2012)). Thus, it is not merely the inclusion of a lie but also incomplete or inapplicable language in a collection letter that may form the basis for a potential FDCPA violation.

Third Circuit Follows Seventh to Uphold FCRA b(b)(3) Claim

Link: Long et al. v. Septa (3d. Cir. 2018)

I recently posted about the Seventh Circuit’s opinion in Robertson v. Allied Solutions, LLC.

In Long, The Third Circuit issued a similar opinion on standing where the plaintiff alleged that the Southeastern Pennsylvania Transportation Authority failed to (1) give job applicants a copy of the credit report they relied upon in taking an adverse action against them and (2) send them the appropriate notices required under § 1681b(b)(3) of the Fair Credit Reporting Act. The case was argued by Deepak Gupta and an amicus brief was filed by Francis & Mailman.

The court found that plaintiffs met Article III standing requirements espoused in Spokeo in regards to the credit reports, but not for the notices. The court applied the two-part test from Spokeo, asking whether Congress intended to grant redress for the particular injury alleged and whether the injury in question has a close relationship to a harm traditionally recognized under common law.

As to the claim for failing to give a copy of the report, the court pointed out the unambiguous language in the FCRA creating a right of action and said this about the historical analysis:

Common-law privacy rights were historically understood as being invaded by “(a) unreasonable intrusion upon the seclusion of another, . . . (b) appropriation of the other’s name or likeness, . . . (c) unreasonable publicity given to the other’s private life, . . . or (d) publicity that unreasonably places the other in a false light before the public . . . .” Restatement (Second) of Torts § 652A(2)(a)-(d) (1977). These latter three types of privacy torts represent interference with an individual’s ability to control his personal information. That is analogous to the injury here, which is the use of Plaintiffs’ personal information—their consumer reports—without Plaintiffs being able to see or respond to it.

The Third Circuit called out the Robertson case, saying “[t]he Seventh Circuit concluded, as do we, that a plaintiff has standing to sue based on allegations that she did not receive the pre-adverse action notice required by § 1681b(b)(3).”

As to the claim regarding the notice requirements, the court found it was a bare procedural violation, divorced from any concrete harm, that cannot satisfy the injury-in-fact requirement of Article III. “Plaintiffs became aware of their FCRA rights and were able to file this lawsuit within the prescribed limitations period, so they were not injured … Plaintiffs are similar to Groshek, and like him, they lack standing, because although they did not receive FCRA rights disclosures, they understood their rights sufficiently to be able to bring this lawsuit.”