It seems that all of America is waiting for a decision on the Affordable Care Act by the United States Supreme Court. The decision is expected to be issued tomorrow and it has significant political implications, but there’s another case that may also be decided that I’m watching closely that I think could very damaging to consumers. The case on my mind is First American Financial Corporation versus Edwards and it’s an appeal brought by a title insurance company that lost a case brought by a consumer under the Real Estate Settlement Procedures Act (RESPA) alleging violation of an anti-kickback provision contained within the law.
At issue in the Edwards is the premise that a consumer who seeks to bring a claim arising under a consumer protection act in federal Court must be able to show an “injury in fact”. First American Financial Corporation has argued that Article III of the U.S. Constitution limits jurisdiction of the Federal Courts to claims where a party can show an “injury in fact” and that where a claim is limited to statutory damages there is no standing to bring the claim. This basically means that if a debt collector telephones you at 2am demanding payment of a disputed debt, but you never pay any money, there is no claim because you weren’t injured.
This argument, if accepted by the Supreme Court, could effectively confound enforcement of our federal consumer protection statutes. When Congress passed the consumer protection statutes it provided for individual and class action claims with recovery of both statutory damages (limited at $1,000 for an FDCPA claim) and actual damages. Congress provided statutory damages because economically valuing the harm of unlawful debt collection activities can be difficult, costly, and sometimes impossible. Allowing claims to be brought by private individuals, rather than the government was done to create an army of private attorneys general who could enforce the consumer protection statutes without taxpayers having to fund another very large government agency.
Enforcement of a consumer protection statute, such as the FDCPA or RESPA is not designed to enrich the aggrieved consumer. Statutory damages are capped at $1,000 on an individual FDCPA claim. In the world of lawsuits, this is about as small as they get. However, these lawsuits are an important way of policing the marketplace and ensuring that unlawful competitors do not put law abiding debt collectors at a competitive disadvantage.
If the Supreme Court agrees with First American Financial Corporation yet another door to our Federal Courts will be slammed shut on the American people. Granted, there will still be some limited consumer rights litigation, but those cases will be much rarer and a majority of debt collection abuses will not be remedied. The costs of bringing an FDCPA, or other consumer protection claim, will be greatly increased and it will likely be much more difficult to find an attorney to bring the claim. Sadly, I do not expect good news tomorrow. The current Court has ruled consistently in favor of business interests and against access to our civil justice system for our people. According to a recent article in the Huffington Post, for cases involving the U.S. Chamber Commerce this term, the Court has ruled in favor of business every single time. Contrast this to the Warren Court where the U.S. Chamber of Commerce won only 46% of its cases. We will have to see what the ruling is, but I fear that tomorrow will be a dark day for consumers and the American marketplace.