7th Circuit affirms dismissal of debt collection challenge for lack of injury

Though a woman defeated a debt collector’s claim for arbitration, her lawsuit challenging the creditor’s debt collection practices lacks standing, the 7th Circuit Court of Appeals has affirmed.

Judge Frank Easterbrook wrote the five-page order Thursday in Francina Smith v. GC Services Limited Partnership and ORG GC GP Buyer, LLC, 19-3494.

The debt at issue involves plaintiff-appellant Francina Smith and her Sam’s Club credit card obtained through Synchrony Bank. The bank in 2016 hired GC Services to collect an allegedly unpaid balance on Smith’s card.

GC informed Smith that it would commence collections proceedings unless she disputed the debt in writing, but she refused and instead filed suit. The Indiana Southern District Court declined to require arbitration between Smith and GC, and the 7th Circuit affirmed in October 2018.

Back in the Southern District, Smith tried to proceed with her claim that GC violated the Fair Debt Collection Practices Act by requiring her to dispute the alleged debt in writing. Judge Richard Young ultimately dismissed the case for lack of standing, and the 7th Circuit affirmed Thursday.

“This circuit has not addressed the question whether a debt collector violates (15 U.S.C.) §1692g(a)(3) by telling consumers to put their disputes in writing,” Easterbrook wrote for the unanimous 7th Circuit panel. “We do not take up that subject today, because we agree with the district court that Smith lacks standing to sue.”

Much of Easterbrook’s opinion dealt with Casillas v. Madison Avenue Associates, Inc., 926 F.3d 329 (7th Cir. 2019), an opinion by now-Supreme Court Justice Amy Coney Barrett. There, the plaintiff claimed the debt collector violated the Fair Debt Collection Practices Act by not informing her that she had to dispute her debt in writing to take advantage of the protections of the act. The 7th Circuit, however, held, “[N]o harm, no foul.”

“Smith takes a position opposite to that of Casillas: that a debt collector violates the Act by telling a consumer to communicate in writing,” Easterbrook wrote. “Her problem is the same: No harm, no foul.

“… Even in her supplemental memorandum, Smith has not tried to explain how a need to use a writing deterred her from disputing a debt (she does not claim to be illiterate) or what good a dispute would have done her,” Easterbrook continued. “The district judge observed that Smith ‘did not allege she had any doubt that she owed the creditor the stated amount of money. And she failed to allege any injury that flowed from her failure to dispute the debt.’

“… We do not hold that someone asserting a violation of §1692g(a)(3) cannot establish injury; we hold only that Smith did not allege injury, because she did not try to show what good a dispute would have done her,” the judge concluded. “She is no worse off than if the letter had told her that she could dispute the debt orally. Because she is uninjured, the judgment of the district court dismissing the suit for lack of Article III standing is AFFIRMED.”