On August 31, 2021, the Seventh Circuit Court of Appeals overturned a summary judgment decision by the United States District Court for the Northern District of Illinois and returned the action with directions to dismiss for lack of competence in the matter. See Wadsworth v. Kross, Lieberman & Stone, Inc., n ° 19-1400, 2021 WL 3877930 (7th Cir. 2021). The Seventh Circuit motivated the lack of standing for the Article III plaintiff with respect to her claims filed under the Fair Debt Collection Practices Act (“FDCPA”), 15 USC § § 1692 et seq..
As a backdrop, the Applicant accepted a job offer where she would receive a signing bonus after thirty (30) days of employment, and another bonus after one hundred and eighty (180) days of employment. However, according to the employment contract, the plaintiff agreed to reimburse her employer for the full amount of bonuses received, in the event that she voluntarily terminated her employment or was dismissed for just cause within eighteen ( 18) month following the second premium payment. As a result, the Applicant was terminated one (1) year after his employment.
In response, the employer hired the defendant’s debt collection agency to collect the premiums. In the effort to do so, the defendant mailed a collection letter to the plaintiff and called the plaintiff a total of four (4) times. Based on this conduct, the plaintiff brought an action against the defendant in the Northern District of Illinois, claiming that the defendant’s letter and phone calls violated the FDCPA. Specifically, the alleged defendant plaintiff violated § 1692g (a) for failing to notify her statutory rights within five (5) days of initial contact, and § § 1692d (6) and 1692e (11) for failing to notify not identifying himself as a debt collector or attempting to collect a debt during calls. The defendant argued that the FDCPA was inapplicable because the signing bonus was not a debt within the meaning of the FDCPA and that it was not acting as a collection agent because the plaintiff’s premium payments were not overdue at the time he posted the letter and made the appeals. Both parties have requested summary judgment. The district court concluded that the signing bonus was a debt and therefore the defendant was required to comply with the disclosure requirements under the FDCPA. See Wadsworth v. Kross, Lieberman & Stone, Inc., n ° 17 C 8167, 2019 WL 8405215 at * 2 (ND Ill. February 1, 2019). As a result, the district court issued summary judgment for the plaintiff and the defendant appealing.
On appeal, the Seventh Circuit embarked on a very different analysis – focusing only on whether the plaintiff had standing. The Court drew on the Supreme Court’s decision in Speak, which requires a plaintiff to have suffered harm in fact attributable to the defendant’s alleged conduct to establish standing. See Spokeo, Inc. v. Robins, 136 S.Ct. 1547 (2016). To this end, the courts have long held that prejudice must be tangible. In the context of the FDCPA, courts have repeatedly recognized that a debtor suffers tangible harm when a debtor fails to inform a debtor of his statutory rights, “only if it interferes with the debtor’s ability to pay. ‘use this information for purposes material than the envisaged statute.
Using this analysis, the Seventh Circuit determined that the plaintiff could only suffer tangible harm if the defendant’s failure to notify his statutory rights caused him to suffer harm identified by the FDCPA – i.e. paying l money she didn’t owe. Because the plaintiff admitted that she did not pay the defendant or the employer the premium payments, and that she simply suffered from “stress” and “anxiety”, the Court held that the plaintiff had not suffered any tangible prejudice attributable in fact to the violations alleged by the defendant of the FDCPA. Therefore, the Seventh Circuit reversed the lower court’s summary judgment decision due to the plaintiff’s lack of standing and remanded the action with directions to dismiss for lack of jurisdiction.