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Receiving Collection Letter Overstating Debt Owed Does Not Constitute Harm Sufficient to Create Standing Under Fair Debt Collection Practices Act

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In Nettles v. Midland Funding LLC the Seventh Circuit recently held Plaintiff Ashley Nettles did not have standing to bring a claim against Defendant Midland Funding LLC under the Fair Debt Collection Practices Act (“FDCPA”) on the grounds that Plaintiff suffered no harm in fact for receiving a debt collection letter that overstated her remaining balance owed to Defendant.    

The case was brought to the Seventh Circuit on appeal by Midland after the District Court denied Midland’s motion to compel arbitration. Plaintiff applied for and received a credit card in 2015 from Credit One Bank. The terms of the cardholder agreement stated that by using the credit card Plaintiff agreed its contract terms, which included a provision that either party may compel arbitration if a dispute arises relating to the credit card account, including collection matters. Plaintiff used the credit card and, therefore, became bound by its terms. Plaintiff stopped paying her credit card bill in January 2016. Credit One Bank then sold the debt owed by Plaintiff to MHC Receivables LLC, which then sold the debt to Sherman Originator III LLC, which finally sold the debt to Defendant Midland Funding LLC. Midland hired a law firm to sue Plaintiff in Michigan state court to collect the debt. The parties entered a consent decree which required Plaintiff to pay off the $689.37 debt by monthly withdrawals of $50 from her bank account. The withdrawals occurred for three months, until Midland’s law firm dissolved. Plaintiff at that point owed Midland $539.37.

In June 2018, a Midland affiliate sent Plaintiff a letter stating it would be servicing her debt and that she owed Midland $643.50, about $100 more than her actual debt. Plaintiff brought a suit against Midland for violating §1692e (False or misleading representations) and §1692f (Unfair practices) of the FDCPA by overstating her debt in the collection letter. Midlands moved to compel arbitration arguing the dispute arose under the credit cardholder agreement, which included an arbitration clause. The District Court rejected Midland’s argument and denied the motion to compel arbitration, holding that the dispute did not arise under the cardholder agreement. Midlands appealed to the Seventh Circuit. 

The Circuit Court did not even reach the issue of compelling arbitration, finding that Plaintiff had no standing to bring claims under the FDCPA as she had not alleged she suffered any harm by the debt overstatement in the collection letter nor that the letter created any risk of harm to her. Plaintiff admitted the letter had not affected her at all and that her only injury was the receipt of a noncompliant collection letter. The Court further rejected an argument made by Plaintiff’s counsel at oral argument that Plaintiff’s annoyance and consultation with a lawyer were sufficient to establish such injury that Plaintiff standing under the FDCPA. The Circuit Court remanded the case and ordered the action dismissed for lack of subject matter jurisdiction.  

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