Collector - January 2021 - 25

collector liability under one of the most
punitive statutes available to consumers.

FCRA: COLLATERAL ATTACKS
OF DEBTS
Increasingly, plaintiffs have alleged
consumer reporting agencies (CRAs) violate
the FCRA by accurately reporting a debt
that the plaintiff believes is legally invalid.
Under this scenario, often characterized as
a collateral attack, a plaintiff would argue
that a debt is inaccurate because the CRA
should know of the illegality rendering the
debt contrary to the law and thus invalid.
Largely, courts have dismissed these types of
collateral attack claims-with opinions disposing
of these cases from the 4th, 7th, 9th and 10th
Circuits. Most recently, the 7th Circuit wrote
in Denan v. Trans Union LLC that a consumer's
legal defense to a debt " is a question for a court
to resolve in a suit against the [creditor,] not a
job imposed upon consumer reporting agencies
by the FCRA " and that " [b]ecause no formal
adjudication discharged plaintiff 's debts, no
reasonable procedures could have uncovered
an inaccuracy in plaintiff 's credit reports. "
This well-reasoned legal position is on all
fours with the practical reality that CRAs are
not courts of law and lack the tools necessary
to umpire claims between consumers and
creditors. However, consumers continue
to increasingly bring collateral attacks and
there appears to be some level of coordinated
effort to do so within the plaintiffs' bar.
Debt collectors should be aware of this
and work to coordinate defenses with the
CRAs where appropriate. Creditors or
furnishers stand in a far better position to
thoroughly investigate a disputed debt than
a CRA on a reinvestigation, and the FCRA
is not structured as an appropriate vehicle to
raise these types of claims.

STANDING IN RULE 23 CLASS CASES
Since the Supreme Court's decision in
Spokeo Inc. v. Robins, arguments about
whether plaintiffs have standing under
Article III to pursue a claim have become
hot-button threshold issues. In early
2020, the 9th Circuit issued an opinion in
Ramirez v. TransUnion LLC, an FCRA class

COLLECTOR 01.21

certified under Rule 23, which spotlights
this confusion.
In Ramirez, the court found that, as
a threshold matter, " every member of
a class certified under Federal Rule of
Civil Procedure 23 must satisfy the basic
requirements of Article III standing. " The
court went on, however, to rule that a
" material risk of harm " was sufficient to
confer standing to each class member. The
" material risk of harm " for over 75% of
class members was an internal report at
TransUnion that was not disclosed to any
third party. The 9th Circuit held that " a
real risk of harm arose when TransUnion
prepared the inaccurate reports and made
them readily available to third parties, " even
though the first time many class members
will have known they were injured at all will
be when they receive a check in the mail.
Based on the Supreme Court's treatment of
prior Article III standing, this decision should
be construed narrowly. However, the decision
to make standing a universal requirement for
Rule 23 class members presents considerable
implications for future class-action litigation-
in particular where the case focuses on
statutory violations. Any new theory of defense
to class-action lawsuits is a benefit to the debt
collection industry. Although Spokeo has not
had the impact that one might have expected
in an individual context, its requirements are
arguably accentuated in the class context and
will continue to be litigated in 2021.

A NEW HOPE?
As a continuation of 2020, this year will be
one in which the debt collection industry
will be asked to adapt to and overcome the
challenges presented by the COVID-19
pandemic and the litigation that has followed.
However, changes to the FDCPA that clarify
and modernize communications with
consumers, the possibility of a strong defense
to the excessive liability of the TCPA, and the
burgeoning application of Spokeo to classaction claims give us hope for the new year.
David N. Anthony is a partner, Jonathan
P. Floyd is an associate and John E. " Jed "
Komisin an associate at Troutman Pepper.

1

The CFPB's debt collection
rule, which clarifies and
modernizes communications
with consumers, may offer
some relief to meritless
FDCPA claims.

2

While the CFPB published
a FAQ addressing CARES
Act consumer reporting
requirements, confusion
remains about how to apply
the consumer reporting
provision.

3

Consumers continue to
bring collateral attacks
under the FCRA and there
appears to be some level of
coordinated effort to do so
within the plaintiffs' bar.
25



Collector - January 2021

Table of Contents for the Digital Edition of Collector - January 2021

Collector - January 2021 - Cover1
Collector - January 2021 - Cover2
Collector - January 2021 - 1
Collector - January 2021 - 2
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