Servicer Wins Dismissal in Untimely Debt Validation Class Action
On February 22, 2017, the United States District Court for the Middle District of Alabama issued an opinion in Yeager v. Ocwen Loan Servicing, LLC. The Yeagers brought a putative class action against Ocwen claiming the servicer violated the Fair Debt Collection Practices Act. Specifically, the borrowers claimed that Ocwen failed to send the debt validation notice within five days of Ocwen's initial communication with the borrowers as required by Section 1692g(a) of the statute.
In late 2012, Ocwen acquired Homeward Residential. The acquisition included the servicing rights to the Yeagers' loan. On or about March 15 or 16, 2013, Ocwen initially contacted the borrowers by sending them the RESPA hello letter explaining, among other things, that Ocwen will be the new servicer of their loan effective April 1, 2013. Pursuant to Section 2605(b)(2)(A) of RESPA, the hello letter must be sent by a servicer at least 15 days prior to the effective date of a servicing transfer.
According to the pleadings, the loan was in default as of the April 1, 2013 transfer date. As such, the FDCPA obligates Ocwen to send a debt validation notice within 5 days of its initial communication with the borrowers. As stated above, Ocwen sent the hello letter on March 15th or 16th, and therefore was, arguably, obligated to send the FDCPA debt validation letter by March 22, 2013, at the latest.
PICK YOUR POISON
Ocwen did not send the debt validation notice within 5 days of its initial communication with the borrowers because it was not servicing the loan at this point in time. To do so could subject it to violations of other provisions of the FDCPA, namely attempting to collect a debt that it was not legally authorized to collect. Instead, Ocwen sent the debt validation notice on April 2, 2013, a day after it took over the servicing of the loan. In February 2014, the borrowers filed this putative class action against Ocwen for failing to send the debt validation letter within 5 days of the RESPA hello letter, which was its initial communication with the borrowers.
Ocwen filed a motion for judgement on the pleadings arguing that the Yeagers lacked standing on the grounds that the borrowers did in fact receive the debt validation letter to which they claimed to be entitled. The magistrate denied Ocwen's motion with leave for Ocwen to renew its standing argument depending on the outcome of the United States Supreme Court case, Spokeo, Inc. v. Robins.
SPOKEO, INC. v. ROBINS
Spokeo was issued on May 16, 2016, and, soon thereafter, Ocwen renewed its motion for judgment on the pleadings. In Spokeo, a consumer sued a website operator for allegedly violating the Fair Credit Reporting Act for publishing inaccurate information about him. The trial court dismissed the case finding that the plaintiff lacked standing for failing to plead the injury in fact element of standing. The Ninth Circuit reversed, and Spokeo appealed to the Supreme Court.
Article III of the Constitution limits the jurisdiction of the federal courts to litigants with standing to sue. According to Spokeo, Supreme Court precedent has created three elements that must be met in order for a plaintiff to have standing to sue in federal court. In Spokeo, as well as the present case, the court's attention was on the first element, which requires a plaintiff to have suffered an injury in fact. Supreme Court case law has further defined injury in fact as injury that is concrete, particularized, and actual or imminent, and not hypothetical. In dicta, the Spokeo court instructs that “concrete” harm can include intangible harm; however, the mere fact that a statute grants a person a statutory right does not mean a plaintiff automatically satisfies the injury in fact requirement. Article III standing requires a concrete injury even in the context of a statutory violation. A bare procedural violation without concrete harm does not satisfy the injury in fact requirement.
The Supreme Court, ultimately, remanded Spokeo to the Ninth Circuit on the grounds that the Ninth Circuit merely analyzed the particularity component of injury in fact, but failed to analyze the concreteness component adding that an injury must be both particular and concrete in order for a plaintiff to establish standing.
IMPACT OF SPOKEO ON YEAGER
In the present case, Ocwen argued in its renewed motion that the Yeagers failed to satisfy the concreteness element of the injury requirement. In citing Spokeo at length, the district court agreed with Ocwen's argument. Specifically, the court found that the Yeagers were alleging a procedural violation of the FDCPA without any concrete harm or risk of harm. The district court framed the issue, based on Spokeo, as whether the alleged specific procedural FDCPA violation involved a degree of risk sufficient to meet the concrete injury requirement. The court concluded that the receipt of a FDCPA debt validation letter 13 days late without any allegation of harm or risk of harm was insufficient to satisfy the injury in fact component of standing.
The court added that the Spokeo common sense approach dictates that the delay in receiving the debt validation notice, without any harm or risk of harm, does not entail a degree of risk sufficient to meet the concrete injury requirement. Because the Yeagers failed to establish that they suffered a concrete injury, the court lacked jurisdiction to hear their FDCPA suit. On March 23, 2017, the Yeagers appealed the district court's decision to the Eleventh Circuit Court of Appeals.