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Spokeo v. Robins: The Debate Over Whether Consumers Can Sue Lenders and Servicers for “Nothing”

law BHThose who have been involved in mortgage servicing at a management level for any period of time are probably familiar with the concept of strict-liability consumer protection laws. Under certain circumstances, these laws provide “consumers” (however that term is defined by the statute in question) with a right of action against lenders and servicers for errors, omissions or procedural missteps. Examples relevant to lenders and servicers include the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Real Estate Settlement Procedures Act.

These laws have been problematic because they provide general, rather than specific, guidelines such as prohibitions against “dishonesty” or “unfairness.” Thus, whether and when lenders or servicers have violated such laws is very much in the eye of the beholder. For this reason, lawsuits based on such statutes are rarely dismissed at the pleading stage, meaning the defendant must engage in costly litigation and possibly trial in order to effectively contest a claim. Not only is this usually prohibitively expensive, if the plaintiff prevails then plaintiff attorney fees will, in all likelihood, be shifted to the defendant lender or servicer. The result is that lenders and servicers typically settle even highly questionable claims simply to avoid the risk.

Whether plaintiff consumers can bring such claims on the basis of strict liability was the subject of the recent U.S. Supreme Court case of Spokeo v. Robins. The outcome of the case was indecisive. The Supreme Court held that plaintiffs under such statutes must suffer “concrete harm” to have standing to sue. However, the case was remanded to the 9th Circuit court of appeals to determine just what constitutes concrete harm.

That issue is now being examined in lower courts on a case-by-case basis and the debate about what constitutes concrete harm is already beginning to take shape.

In the pending case of Bock v. Pressler & Pressler, the United States District Court for the District of New Jersey had already decided two years ago that the defendant law firm violated the FDCPA by filing a collection complaint with inadequate attorney review. The Pressler court held this to wrongly imply “meaningful attorney review.” However, the plaintiff in Bock never disputed the debt or the accuracy of the allegations of the complaint. Therefore, after the Spokeo opinion was issued the Bock court requested additional briefs addressing whether Bock alleged concrete harm sufficient to confer Article III standing to sue.

The parties in Bock filed supplemental briefs and articulated positions that may echo through hundreds of other pending cases. The Plaintiff argued, among other things, that inadequate attorney review created a risk of consumer harm that was, in and of itself, sufficient to confer standing to sue. The defendant argued that Bock alleged only statutory damages and claimed no actual harm, therefore he failed to allege any concrete injury to himself. As of the date of this article, the matter is under consideration and there has been no ruling.

Those interested in this issue should follow the Bock case. In the area of strict-liability, consumer litigation, the issue of whether Article III standing to sue in the absence of a concrete injury is the most important unresolved issue in play. Although the Supreme Court’s decision in Spokeo was not as decisive as many hoped it would be, it is nevertheless an important development. The onus is now on lenders and servicers and their defense attorneys to effectively articulate why strict-liability consumer lawsuits are unworkable and ultimately harmful to all involved. The Spokeo case created a debate over this question, and therefore it created an opportunity to prevail in that debate.

About Author: Douglas A. Oliver

Douglas A. Oliver is a partner with the Law Firm of Anselmo Lindberg Oliver LLC and Chair of the Firm’s Litigation Group. Oliver is an experienced trial lawyer who practices primarily in the area of contested default servicing in both state and federal courts. Oliver is a frequent author and speaker for continuing legal education relative to default servicing practice, real property, creditors’ rights and the Fair Debt Collection Practices Act and similar laws. Some of Oliver’s recent speaking engagements include: Foreclosure Defenses, FiveStar Foreclosure Lab – Dallas, TX, 9/17/15; Legal League 100 Servicer Summit - Dallas, TX, (Conversation Starter, Borrower Liability Avoidance – determining when servicers or their firms are financially liable) 4/21/15; Legal League 100 Servicer Summit - Dallas, TX, (Conversation Starter, Financial Times - balancing compliance and financial pressure) 9/6/14; Legal League 100 Servicer Summit - Dallas, TX (Conversation Starter, Dealing With Creative Foreclosure Defenses) 4/18/13; MBA Default Servicing Conference - Dallas, TX (Panelist, Default Super Session) 2/22/13, and ALFN On-Site Servicer Training - Dallas, TX (Case Law Update) 9/13/12. Mr. Oliver is a 1993 graduated of Drake Law School, with honors. He is a member of the Illinois State Bar Association and is licensed to practice in all Illinois state and federal courts. Oliver is an active member of the Legal League 100, the Mortgage Bankers Association, and USFN.
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