Despite making many arguments to the contrary, a District Court judge in New Jersey has granted summary judgment to the defendant in a Fair Debt Collection Practices Act case, ruling the plaintiffs now lack standing to sue in federal court, even though a class had previously been certified in the case.
A copy of the ruling in the case of Schultz v. Midland Credit Management can be accessed by clicking here.
Back in 2015, the defendant mailed collection letters to the plaintiffs — a husband and wife — attempting to collect on separate credit card debts. The letters included the following statement: “We are not obligated to renew this offer. We will report forgiveness of debt as required by IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case.”
The plaintiffs filed suit, because the amount they owed was less than $600 — the threshold for reporting debt cancellations to the Internal Revenue Service.
The plaintiffs never made any payment on the debt and, during depositions, testified that they could not afford to pay their debts and were struggling to pay their rent. They claimed to be afraid and confused after receiving the letters and filed suit, accusing the defendant of violating Section 1692e of the FDCPA. Back in 2020, the judge certified a class in the case, but then came the Supreme Court’s ruling in TransUnion v. Ramirez, at which point the defendant filed a motion for summary judgment, arguing the plaintiffs did not have standing to sue.
The plaintiffs argued that being subjected to false or deceptive statements is akin to fraud, and that they relied on the alleged threat in the letters by thinking they were going to be reported to the IRS. In order to show they have standing, the plaintiffs would need to show evidence that bears a close relationship to reliance and damages under fraud, which usually means taking some action as a result of receiving the letters. But not only did the plaintiffs not take any action, they testified during their depositions that they couldn’t afford to pay the debts even if they wanted to. “As Plaintiffs conceded they did not have the means to make any payments, it is unclear how they could have relied on any misleading language in the Collections Letters, as they would not have paid their debt regardless of whether they read the IRS Reporting Language,” wrote Judge Madeline Cox Arleo.
