You've Got Mail: How the Eleventh Circuit Will Now Allow Debt-collectors to Collect Time-barred Debts

• Publication year: 2021

YOU'VE GOT MAIL: How the Eleventh Circuit Will Now Allow Debt-Collectors to Collect Time-Barred Debts

Alejandro Guarin

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YOU'VE GOT MAIL: How the Eleventh Circuit Will Now Allow Debt-Collectors to Collect Time-Barred Debts^*

I. Introduction

Lending, borrowing, and collecting money is one of the most essential aspects of a capitalist society. Lenders often take risks when lending money to borrowers under the known risk that the lenders may not get their money back. as such, it should come to no surprise that, at times, borrowers may not pay the money they have borrowed. consequently, debt-collectors' practices in the United States, at one point in time, became abusive, which led to the passing of the Fair Debt Collection Practices Act¹ ("FDCPA") in 1977.² The FDCPA serves as a shield of protection from abusive practices from debt-collectors. The FDCPA's language, however, has created some confusion regarding the requirements which would allow a plaintiff to have standing in front of a court of law, specifically, Article iii standing of the united States Constitution.

Article III of the Constitution of the United States³ sets the foundation of the American judiciary. Section 2 of Article III further provides the basis under which a plaintiff can stand in front of an American court. As its most basic principle, Article III states that the courts may hear cases and controversies. Though this requirement extends to most aspects of American Jurisprudence, the FDCPA has created its own type of controversy and confusion among the different

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Federal Circuits in the United States. The United States Court of Appeals for the Eleventh Circuit analyzed this controversy in the case Trichell v. Midland Credit Mgmt., Inc.⁴ Trichell discussed in depth the topics of standing under both the FDCPA and Article iii of the Constitution with its ultimate holding now allowing debt-collectors to collect on debts that are time-barred while, at the same time, preventing plaintiffs from bringing lawsuits for injuries that are not concrete nor particularized.

II. Factual Backghound

Midland Credit sent several collection letters to John Trichell, an Alabama resident. Trichell had defaulted on his credit card debt more than six years prior to the mailing of this collection letter. In the letter, Midland offered Trichell a settlement of the debt which would reduce the amount owed from $43,000 to $13,000. Although this offer seemed generous, Midland had no right to collect on this debt as it was beyond Alabama's statute of limitations. Midland was aware of this limitation and at the bottom of each letter sent, Midland included a disclaimer which advised Trichell that due to the age of the debt, Midland could not bring suit against Trichell or report it against his credit. Trichell brought suit against Midland under the FDCPA, stating that the letters were misleading. The district court dismissed the complaint for failure to state a claim. The district court concluded that the letters sent to Trichell were not misleading.⁵

Similarly, Keith Cooper, a Georgia resident, received collection letters from Midland. Just like Trichell, Cooper defaulted on a credit card six years prior and Midland attempted to collect the debt through collection letters. The letter received by Cooper also offered Cooper a "generous" offer to settle the credit card debt. Cooper's debt, however, was also time barred in accordance to Georgia's statute of limitations. The collection letter received by Cooper contained a similar disclosure as the Trichell letter which stated that Midland would not be able to file suit against Cooper nor report such debt on his credit. Cooper also filed suit against Midland. Cooper's complaint was slightly different than Trichell's. In his complaint, Cooper alleged that Midland failed to warn Cooper that making a payment on the time-barred debt would constitute a new promise, and thus would revive his old debt. The district court also dismissed Cooper's case for failure to state a claim. Just like in Trichell's

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original suit, the district court found that the collection letters were not misleading.⁶

III. Legal Background

To properly understand the decision in Trichell, we must first analyze the Federal Debt Collection Practices Act, and Article III Section 2 of the Constitution. These two legal concepts provide a foundation to understand when a Plaintiff can stand in front of an American court. The FDCPA and Article III are not mutually exclusive as courts must rationalize (1) whether a Plaintiff has standing solely based on an alleged statutory procedural violation, or (2) whether the Plaintiff must prove an injury-in-fact in accordance with Article III.

A. The Federal Debt Collection Practices Act

Before the passing of the FDCPA, Congress recognized that debt-collectors were conducting abusive practices towards debtors. The FDCPA starts by stating Congress's concerns at the time of the passing of the Act. In section (a) of the Act, Congress provides its findings by stating that "there is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices."⁷ Section (a) shows that one of the purposes of the Act is to shield consumers from abusive practices by debt-collectors. The Act also indicates that its purpose is to create an even playing field for debt-collectors that follow the rules.⁸ As a whole, the FDCPA intends to ensure consumers are protected from abusive practices such as misrepresentation. Further, the Act intends to eliminate any disadvantages that lawful debt-collectors may incur as a cause of abusive practices by other debt-collectors.

The common test used by courts to determine whether a collection letter has deceived a consumer is the "least sophisticated consumer" standard.⁹ The purpose of this test is to ensure the protection of all types of consumers from "the gullible as well as the shrewd."¹⁰ As such, the courts follow the rule that a clearly false statement does not take away the power of deception to a collection letter.¹¹

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B. Article III Standing

Article III of the United States Constitution sets the jurisdictional guidelines for a federal court to hear cases. Section 2 of Article III provides that federal courts shall have jurisdiction over cases and controversies.¹² the broad language of Section 2 has led to litigation regarding the definition of cases and controversies. through years of analysis, the Supreme Court has held that in order to meet the cases and controversies requirement, the Plaintiff must suffer (1) an injury-in-fact; (2) which is has a causal connection to the Defendant's challenged action; and (3) a favorable decision of the court is likely to redress the injury.¹³ these three requirements are essential for a Plaintiff to have standing in federal court.

The creation of the Article III Standing test was clarified in Lujan v. Defenders of Wildlife.¹⁴ In this case, several environmentalist groups brought an action against the Secretary of the Interior after the Secretary of the Interior reduced the geographical scope of the Endangered Species Act.¹⁵ As part of their argument, the environmentalist argued that the geographical scope of the statute will have a direct effect on endangered species which were of interest to the environmentalists.¹⁶ The environmentalist groups prevailed through the district court and the court of appeals.¹⁷ The Supreme Court of the united States granted certiorari and ultimately reversed the lower court's decision, stating that the environmentalist groups lacked standing because they did not establish an injury-in-fact.¹⁸ In its analysis, the Supreme Court held that for a plaintiff to establish the injury-in-fact requirement, a plaintiff's injury must be concrete and particularized.¹⁹ This means that a plaintiff's injuries cannot be hypothetical and the injuries must be particular to the plaintiff.²⁰ Furthermore, the Court stated that even though the reduction of the geographical scope of the statue may have a direct effect on endangered animals, these effects were only mental and psychological injuries to the Plaintiffs and the Court does not recognize these injuries as sufficiently

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concrete.²¹ The holding in Lujan creates the foundation that a party cannot stand in front of a federal court for injuries of a person's interest.²² Instead, a party must have a concrete, personal injury.²³

In recent years, the issue of standing appeared again in front of the Supreme Court in the case Spokeo, Inc. v. Robins.²⁴ Spokeo was a search engine agency which, upon request, would provide information about specific individuals. Through its search engine, Spokeo provided incorrect information about Robins. Upon learning about the inaccuracies, robins sued Spokeo under the Federal Credit reporting Act (FCRA).²⁵ In his claim, Robins claimed that Spokeo violated Robins' statutory right and that Robins' injury was particularized. Thus, the Court of Appeals for the Ninth Circuit held that Robins proved an injury-in-fact.²⁶ The Supreme Court reviewed the case and held that the Ninth Circuits analysis was incomplete.²⁷ The Court stated that for a party to be able to have standing in court, the injury to Plaintiff must be both concrete and particularized.²⁸ Although Robins was able to show that Spokeo's error created an injury that was particular to Robins, the Ninth Circuit did not determine whether Robins' injuries were concrete.²⁹ In its opinion, the Court explained that it would be difficult to find that a minor portion of misinformation, such as an incorrect zip code, could create a concrete harm.³⁰ Accordingly, the Court vacated and remanded the case for further proceedings to determine whether the incorrect information by the search engine created any actual harm for Robins.³¹

The Court in Spokeo also explained the distinction between statutory standing and constitutional standing. In its opinion, the Court...