The U.S. Court of Appeals for the Seventh Circuit has ruled that a plaintiff in a putative class action had standing to assert FDCPA claims against the purchaser of her debt and the purchaser’s servicer based on the $3.95 she paid in postage to respond to a second validation letter after she had already responded to the first validation notice.

In Mack v. Resurgent Capital Services, L.P., the plaintiff had received an initial validation notice from the debt collector hired by the servicer of her debt.  The letter informed her that her credit card account had been placed for collection and that she owed $7,179.87.  It also identified the purchaser of her debt as the “current creditor.”  Within 30 days of receiving the letter, the plaintiff mailed a validation request to the debt collector, paying $6.70 in postage for priority mail and a $3.45 certified mail fee.  The plaintiff then received a second validation letter sent by the servicer that identified the purchaser of her debt as the “current owner.”  She sent a second validation request to the servicer for which she paid fifty cents in postage for regular mail and a $3.45 certified mail fee.

Having never received validation of her debt from the purchaser, servicer, or debt collector, the plaintiff filed a class action lawsuit against the purchaser and servicer alleging violations of the FDCPA.  The plaintiff alleged that she was confused and alarmed by the second letter.  She claimed that the defendants had engaged in a deceptive collection practice because the second validation letter “would cause any consumer, let alone the unsophisticated consumer, to believe that she must yet again dispute the Debt despite the fact that such consumer had already submitted a valid dispute of the Debt.” 

The district court, treating the defendants’ motion to dismiss as a summary judgment motion, ruled that the plaintiff had failed to establish standing because the time and money spent to send the second validation request did not rise to the level of detriment required for FDCPA standing.  According to the district court, the second letter “did not adversely affect any interests Congress sought to protect through the FDCPA and instead effectively provided [the plaintiff] with another opportunity to dispute her debt if she failed to properly do so upon receipt of the first letter.”  The district court also vacated its previous order certifying the class.

As an initial matter, the Seventh Circuit indicated that because the district court should not have treated the defendants’ motion to dismiss as one for summary judgment, it would review the case as an appeal from a dismissal.  The Seventh Circuit found that the second letter had caused the plaintiff “to suffer a concrete detriment to her debt-management choices in the form of the expenditure of additional money to preserve rights that she had already preserved.”  According to the Seventh Circuit, “[m]oney damages caused by misleading communications from the debt collector are certainly included in the sphere of interests that Congress sought to protect.” 

The defendants argued that because the plaintiff spent the money to clear up her confusion, the cost was insufficient to establish standing.  While acknowledging that it has previously held that confusion is not itself an injury, the Seventh Circuit indicated that the plaintiff was not alleging that confusion was itself her injury.  Instead, she was alleging that her confusion caused her to act to her detriment, namely to spend extra money to preserve her right to seek validation, which she had been misled to believe she failed to do the first time.  According to the Seventh Circuit, the plaintiff had been misled to her financial detriment and “that the dollar cost was modest is irrelevant.”

The Seventh Circuit reversed the dismissal and remanded the case to the district court to redefine the previously certified class to include only those persons who had acted to their detriment upon receiving a second validation letter.  This restriction on class members is likely to substantially reduce the size of the class and could even mean that no class can be certified because so few people can satisfy this restriction.