Fifth Circuit Holds Mere FDCPA Statutory Violation, Future Risks of Harm, Confusion, and Lost Time Are Insufficient to Establish Article III Quality | Vide Rome LLP

Financial institutions, debt collectors, debt collection law firms, and consumer-facing businesses should note that the Fifth Circuit Court of Appeals has ruled that the mere assertion of a violation of the Fair Debt Collection Practices Act (“FDCPA”), confusion, loss of time, and/or future risk of harm are not sufficient to establish standing under Article III. The Fifth Circuit’s enforcement and clarification of the 2021 U.S. Supreme Court ruling in TransUnion LLC vs. Ramirez—US—, 141 S. Ct. 2190, 2200 (2021) (“TransUnion”) should dismiss other pending actions and bar future actions based on allegations of simple statutory violation of the FDCPA, a future risk of harm, lost time, and/or confusion resulting from debt collection communication.

In Perez vs. McCreary, Veselka, Bragg & Allen, PC— F.4th —, No. 21-50958, 2022 WL 3355249, at *1 (5th Cir. Aug. 15, 2022), the Fifth Circuit (“Fifth Circuit”) Court of Appeals reversed a class certification order and remanded the case to dismiss for lack of jurisdiction, finding that a violation of the FDCPA, by itself, is insufficient to confer standing under Article III.[1] Further, the Fifth Circuit held that an alleged risk of future harm, confusion, and/or waste of time was not sufficient to allege the factual harm required for Article III to be able to bring a lawsuit before a court. federal court.

Summary of facts and background

Mariela Perez (“Claimant”) received a debt collection letter from McCreary, Veselka, Bragg & Allen, PC (“Defendant”), a law firm specializing in debt collection for local governments in Texas. The letter demanded that she pay an outstanding utility debt owed to the city of College Station. However, the statute of limitations had expired on said debt,[2] which was not disclosed in the letter. Plaintiff sued Defendant in the United States District Court for the Western District of Texas (“District Court”) for violation of Section 1692e of the FDCPA.[3]

The plaintiff’s complaint alleged three injuries resulting from the defendant’s letter: (1) “created a significant risk of harm”, since the plaintiff could have paid its statute-barred debt; (2) misled and confused her as to the enforceability of her debt; and (3) time lost due to consulting a lawyer to determine the enforceability of the debt. Plaintiff sought to certify a class of Texans who had received the same form letter from defendant attempting to collect a statute-barred debt.

Plaintiff and Defendant sought summary judgment, and Plaintiff also sought class certification. The defendant argued that the plaintiff lacked standing to sue because she had not suffered any concrete harm. While these petitions were pending, the Supreme Court of the United States (“SCOTUS”) decided Trans Union. Defendant sought leave to file an additional authorization and pointed to TransUnion in support of its position that plaintiff suffered no factual prejudice.

The district court granted class certification and held that the violation of plaintiff’s statutory rights under the FDCPA constituted injury of fact because those rights were substantive and not procedural. Further, the district court ruled that the plaintiff’s confusion constituted concrete factual injury and that the defendant’s letter violated the FDCPA, but factual disputes over an affirmative defense precluded summary judgment. The defendant appealed the class certification order, but did not appeal the portion of the district court’s order that the plaintiff had standing.

Fifth Circuit decision

Although the defendant did not challenge the plaintiff’s standing on appeal, the Fifth Circuit noted its independent obligation to ensure that standing exists.[4] Thus, the Fifth Circuit directed the parties to discuss in oral argument whether Plaintiff suffered concrete factual harm under Trans Union.[5]

The plaintiff asserted that (i) the violation of her statutory rights under the FDCPA itself qualified as factual harm, (ii) the letter placed her at material risk of financial harm, (iii) the letter had confused or misled her, (iv) the letter required her to waste her time consulting a lawyer, and (v) receiving the unwanted letter was analogous to the tort of trespassing in solitary confinement.[6] The Fifth Circuit analyzed each of these theories under Trans Union and held that none of these alleged damages satisfied the factual injury requirement for Article III standing.[7]

In reaching its decision, the Fifth Circuit applied the SCOTUS analysis in Trans Union, which held that a plaintiff is required to “demonstrate (1) that he has suffered a concrete, specific, real or imminent factual harm; (ii) that the injury was probably caused by the defendant; and (iii) that the harm would likely be redressed through legal action. »[8]

First, the Fifth Circuit noted that Trans Union explicitly stated that “standing under Article III requires concrete harm even in the context of a violation of the lawand that “under Article III, a legal prejudice is not actually an injury.[9] (emphasis added). As such, the plaintiff’s allegation of a statutory violation of the FDCPA was insufficient to establish standing.[10]

Second, the Fifth Circuit rejected plaintiff’s assertion that she had established her standing based on the alleged material risk of financial harm because she could have accidentally paid her statute-barred debt upon reading the letter. The Fifth Circuit held that “if a hazard has not materialized, the plaintiff has not yet been injured.”[11] Thus, “the unmaterialized risk that Perez suffered cannot justify his lawsuit for damages”.[12]

Third, the Fifth Circuit disagreed with the District Court and held that confusion, absent more, is not concrete damage within the meaning of Article III.[13] Specifically, the Fifth Circuit was not persuaded by Plaintiff’s analogy regarding its confusion with the tort of fraudulent misrepresentation, concluding that its confusion is not similar “in kind” to the harm recognized by the misrepresentation. fraudulent since there is here no tangible pecuniary loss resulting from the misrepresentation.[14]

Fourth, the Fifth Circuit ruled that the plaintiff failed to establish that lost time was concrete harm sufficient to support its claims.[15] The Fifth Circuit noted that since plaintiff merely alleged that the alleged injury was a waste of time and not payment to his lawyer for the consultation after receipt of the lawsuit letter, the time lost does not establish a prejudice in fact.[16] However, the Fifth Circuit declined to “conclusively decide whether these injuries are closely related to traditional harms, allowing future parties to elaborate on the issue further.”[17]

Finally, the Fifth Circuit rejected plaintiff’s claim that the letter caused her to suffer concrete harm analogous to the tort of trespassing in solitary confinement since Congress did not notice the receipt of a single unwanted communication the status of a legally recognizable injury or tangible harm in the FDCPA.[18] Accordingly, without standing, the Fifth Circuit could not grant the relief sought by plaintiff for a declaratory judgment that defendant had violated the FDCPA.[19]


The Fifth Circuit is the last to interpret and enforce the SCOTUS decision in Trans Union. Perez is an important victory for financial institutions, debt collectors and all law firms involved in debt collection, as it clarifies that a simple violation of the law, future risk of harm, confusion and/or wasted time are not damages sufficient to satisfy the factual damages requirement to uphold Article III in federal court. This decision is expected to reduce the number of FDCPA actions filed and result in the early dismissal of pending federal actions alleging such insufficient harms and will likely prompt the plaintiff bar to get more creative with its claims of harm.

[1] See identifier. (citing TransUnion LLC vs. Ramirez—US—, 141 S.Ct. 2190, 2205 (2021))

[2] Under TEX. CIV. PRAC. & REM. CODE § 16.004(a), the statute of limitations for bringing an action for debt collection is four years. The defendant’s letter was sent one day after the expiry of the four-year statute of limitations.

[3] 15 U.S.C. § 1692e, titled “False or Misleading Representations,” states that a “collector may not use any false, misleading, or misleading representations or means in connection with the collection of a debt.” In addition, Section 1692e(2)(A) prohibits misrepresentation of “the nature, amount, or legal status of any debt”, and Section 1692e(5) prohibits “threat to take any action which cannot legally be taken or is not intended to be taken.

[4] See Perez2022 WL 3355249, at *3

[8] Identifier. to *2 (quoting Trans Union, 141 S.Ct. to 2203)

[9] Identifier. to *4 (quoting Trans Union, 141 S.Ct. at 2197)

[11] Identifier. (citing Trans Union, 141 S.Ct. at 2210-11)

Martin E. Berry