Tips for Loan Servicers on Defending Consumer Claims in Federal Court and Making Successful Article III Standing Challenges

Loan servicers and their counsel are often sued by consumers during contested mortgage foreclosure proceedings. The United States Supreme Court’s opinions in Spokeo, Inc. v. Robins[1] and TransUnion v. Ramirez[2] continue to be an important precedent in defending consumer claims.

Federal courts are continuing to apply Article III’s concrete injury requirement in a wide range of cases, including the Fair Debt Collection Practices Act (FDCPA), Truth in Lending Act (TILA), and Real Estate Settlement Procedures Act (RESPA), with a fair amount of success for servicers and their counsel. To have standing, the "plaintiff must have

(1) suffered an injury in fact,

(2) that is fairly traceable to the challenged conduct of the defendant, and

(3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins.

Several federal courts of appeal have favorably addressed the question of whether a bare procedural violation of a federal statute constitutes "concrete harm" sufficient to satisfy Article III’s injury in fact requirement:  

• The Second Circuit Court of Appeals has held that a violation of the notice requirements under TILA fails to satisfy the concrete injury requirement of Article III. Schwartz v. HSBC Bank USA, N.A.[3] In that case, a credit card issuer successfully dismissed a suit by a consumer under TILA, which claimed that the issuer failed to warn the consumer of a penalty APR for late payments as required.
• The Second Circuit has also held that claims related to failure to timely release a mortgage, which has been paid in full, can fail to satisfy Article III’s standing requirements when the property has been sold. Maddox v. Bank of NY Mellon Trust Co., N.A.[4] Connecticut District Courts have dismissed FDCPA claims for lack of standing under Article III when the plaintiff fails to allege detrimental reliance on alleged misrepresentations from a defendant. Doody v. Bank of America[5].
• The Seventh Circuit Court of Appeals has held that a violation of an FDCPA provision, whether procedural or substantive, does not necessarily cause an injury in fact. Markakos v. Medicredit, Inc.[6] In that case, the consumer alleged she was not provided with information to which she was entitled to under the FDCPA. However, she failed to allege how the lack of information injured her.
• The Eighth Circuit Court of Appeals has held that an FDCPA complaint needs to allege specific harm to satisfy Article III. Notably, the Court stated that informational injury, risk of future harm, and conclusory allegations of emotional injury were insufficient to satisfy standing. Hekel v. Hunter Warfield, Inc.[7] The Eleventh Circuit Court of Appeals dismissed an FDCPA claim when a purported misleading communication had not been relied upon, and there were no damages. Trichell v. Midland Credit Management.[8]
• The Fourth Circuit Court of Appeals has held that there is no Article III standing for bare procedural violations of RESPA. Baehr v. Creig Northrop Team, PC[9]. In that case, the Fourth Circuit held that consumers had no standing under Article III because the alleged harm of deprivation of impartial and fair competition between settlement service providers was not a harm that Congress sought to prevent by enacting RESPA. Allegations of informational injury alone are insufficient to satisfy Article III standing in Regulation X cases. Aduayi v. PHH Mortgage Services[10]. The 11th Circuit Court of Appeals has held that the failure to correctly or timely acknowledge receipt of a request for information under Regulation X of RESPA fails to satisfy Article III. Meeks v. Ocwen Loan Servicing LLC[11]

Defense counsel managing consumer claims in federal court can utilize this and other federal case law to effectively dispose of suits in an economically feasible manner on behalf of their clients.

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[1] 578 US 330 (2016).

[2] 141 S. Ct. 2190 (2021).

[3] 750 F. App’x 34 (2nd Cir. 2018)

[4] 19 F.4th 58 (2nd Cir. 2021).

[5] 709 F. Supp. 3d 71 (2024).

[6] 997 F. 3d 778 (2021).

[7] 2024 U.S. App. Lexis 25120

[8] 964 F. 3d 990 (11th Cir. 2020).

[9] 953 F. 3d 244, 254 (4th Cir. 2020).

[10] 2024 U.S. Dist. Lexis 40930 (Mass.)

[11] 681 Fed. Appx. 791 (11th Cir. 2017).