Consumer Finance Litigation

The Third Circuit Court of Appeal recently weighed in on the burgeoning number of cases alleging that debt collector use of mailing vendors requires communication with a third party about consumer debt that violates the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692c(b). Ultimately, the Third Circuit held that the consumer did not allege a sufficiently concrete injury in fact, to demonstrate standing to bring claims against the debt collector regarding its use of a mailing vendor.

In Barclift v. Keystone Credit Services, LLC, 2024 WL 655479 (3rd Cir. February 16, 2024), the Circuit Court affirmed the dismissal of a putative class action alleging that Keystone’s use of a mailing vendor to send debt collection communications to Barclift, and consumers like her, could not form the basis of Barclift’s suit against Keystone in the Eastern Pennsylvania District Court. However, the Circuit Court did find that the dismissal should have been without prejudice, as opposed to with prejudice.

In an attempt to avoid dismissal, Barclift amended her complaint to allege “upon information and belief” that Keysone’s mailing vendor, RevSpring, keeps the information it receives about debtors and once mistakenly disseminated the information of more than 1000 patients in the University of Pennsylvania health system. The District Court concluded that the mere possibility that Barclift’s information might be publicly disseminated was not sufficient to allege a concrete injury in fact.

In TransUnion LLC v. Ramirez, 594 U.S. 413 (2021), the United States Supreme Court examined the issues of concrete injury in fact and Article III standing in the consumer protection context. The Third Circuit’s opinion in Barclift notes that Circuit Courts of Appeal have interpreted TransUnion “in different ways” when examining claims that the use of mailing vendors in the debt collection context violates the FDCPA.   

The Third Circuit construed the Eleventh Circuit’s interpretation of TransUnion as “element based” since it focused on the elements of common law torts to ascertain if the harm alleged in response to a statutory violation is sufficiently concrete to constitute an injury in fact. See Hunstein v. Preferred Collection & Mgmt. Servs., Inc., 48 F.4th 1236, 1240 (11th Cir. 2022). Meanwhile, the Tenth Circuit has focused on the kind of harm, much like the dissent in Hunstein, and found that the plaintiff does not need to satisfy the elements of common law torts to prove a concrete injury in fact. See Shields v. Professional Bureau of Collections of Maryland, Inc.,55 F.4th 823 (10th Cir. 2022). Meanwhile, the Seventh Circuit adopted something akin to a Hunsteins element-based approach while also considering the kind and degree of the harm alleged. See Nabozny v. Optio Sols. LLC, 84 F.4th 731 (7th Cir. 2023).

After examining the methodologies employed by its sister circuits, the Third Circuit shied away from an element-based approach and focused on the type and degree of harm. The Court found that by merely alleging that Keystone had caused her “embarrassment”  by transmitting her personal information to what amounted to a “single ministerial intermediately,” Barclift had not alleged the kind and degree of harm necessary to asset a concrete injury and fact and thus lacked Article III standing.  The Third Circuit did hold that since Article III standing dismissals are jurisdictional, a dismissal with prejudice on such grounds is rarely appropriate and modified the order on appeal to an order of dismissal, without prejudice.

The decision in Barclift is the latest, and unlikely to be the last, decision in a growing body of case law that increasingly appears to be a circuit split on how precisely to interpret the United States Supreme Court’s opinion in TransUnion. Regardless of the minutia of the decision regarding the proper interpretation of TransUnion, the outcome of the case in Barclift appears to be a victory for common sense.