Article III standing has been one of the most talked about and litigated issues since the Transunion decision was published in June of 2021. Though standing might be a factor to consider in your collection or litigation strategy, it may not be nearly as important as all the media coverage would have you believe. Most importantly, standing does not necessarily equal success. Why not? Let’s take a closer look.  

So, What is Standing?

Without getting into the specific legalese,  Federal courts can only hear cases in certain circumstances. “Standing” refers to the legal requirement that an individual must have a sufficient connection to a case to participate in it. In the context of the ARM industry, Article III standing ensures that the parties involved have a legitimate interest and a stake in the outcome of their FDCPA or FCRA case and that the Federal court can hear that particular case.

What Standing isn’t.

Standing does not determine if the defendant’s conduct violates the Fair Debt Collection Practices Act (FDCPA) or any other relevant law. It simply establishes the court’s ability to proceed with the case. It says the person filing the complaint included enough language in it to establish federal court is the right place. 

Though standing requires the plaintiff to demonstrate a concrete and specific injury directly caused by the defendant’s actions, determining if the harm amounts to a violation of the FDCPA involves a separate analysis of the specific facts and the application of those facts to the law. In other words, though allegations may establish standing, those allegations don't necessarily equal a violation of the FDCPA or other relevant law.

Likewise, a dismissal based on the lack of standing should not be viewed as a determination that the defendant’s actions did not violate the FDCPA. It only means that the plaintiff did not meet the requirements to continue with the case in Federal court.

Where are we now?

While the concept of standing is well-established, there is currently a circuit split among the federal courts regarding the interpretation of Article III standing in certain creditor’s rights cases.

The 2nd, 5th, and 9th circuits have all held that conclusory allegations of loss or mental and emotional distress are insufficient to confer Article III standing. This narrower reading of standing emphasizes that the alleged harm caused to a consumer must be more than speculative or hypothetical, demanding a clear and direct connection between the consumer’s injury and the collector’s actions. Conversely, the 10th and 11th circuits have held that emotional injuries and other intangible harms are sufficient for Article III standing. 

For practical purposes, this means that the 2nd, 5th, and 9th circuits are less likely to find that a consumer has standing to pursue FDCPA claims in federal court, and you are more likely to be litigating these cases in state courts and based on state law. The broader interpretation of the 10th and 11th circuits will allow more consumer complaints to be heard in Federal Court.

A recent webinar from the Consumer Relations Consortium that discusses this issue in detail can be found here.

What does this mean for your operations?

While the determination of standing is a critical step in creditor’s rights cases, it is crucial to recognize that standing alone does not determine a case’s ultimate success or failure. Just because a consumer is found to have standing to stay in federal court does not mean a creditor has lost. Similarly, if a consumer is deemed to lack Article III standing, it does not necessarily mean the creditor will prevail in state court.

The standing issue only determines where the case will be heard and who will hear it. Another recent webinar presented by the Consumer Relations Consortium includes an in-depth discussion on the benefits of litigating in both courts and the strategies your lawyers can employ. The webinar can be found here.

The bottom line is this: Winning a case depends on a range of factors, most notably the overall merits of the case. Though standing is important, it’s just the beginning and not the end of a case. As a result, while ARM entities should be paying attention to the circuit split, this line of cases doesn’t necessarily mean your organization should be making big strategic companywide decisions because of it. As always, it’s recommended that ARM entities consult with their own counsel before making any decisions affecting legal strategies. 

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