Date: October 26, 2015Author: Denbeaux & Denbeaux
The United States Supreme Court is back in session with the majority of media coverage and debate being focused on cases addressing affirmative action in college admissions, union rights, abortion, and the manner in which populations are counted in drawing voting districts. While it may lack obvious sex appeal, there is one case that has the potential to affect the rights of the 280 million Americans who have credit history by neutering the consumer protection statutes that allow consumers to recover a nominal statutory fine when laws such as the Fair Credit Reporting Act, Fair Debt Collection Practices Act, Real Estate Settlement Procedures Act and Truth in Lending Act are violated. Each of these statutes play a vital role in self-regulation of our financial markets. On November 2, 2015 the Supreme Court will hearoral argument in Spokeo, Inc. v. Robins in which a corporation is asking the Court to find unconstitutional, the awarding of a statutory fine when the consumer plaintiff does not also prove actual damages resulting from the wrongful conduct. The case has the potential to restrict the operation of free markets and roll back the progress of civil rights which should cause us all to have great concern.
At the heart of Spokeo is a concept of constitutional law known as “standing,” which requires a litigant to show (1) a concrete injury (2) caused by the defendant and (3) for which some remedy can be provided by the Court. Standing is not a test of a case’s merits, but requirement to obtain access to the Court. Spokeo challenges whether a concrete injury can be a statutory damage established by Congress, where the Plaintiff did not suffer any actual damages resulting from the offending conduct. Specifically, Robins sued under the Fair Credit Reporting Act and sought to recover a statutory damage ranging from $100-1,000 that Congress enacted to be imposed against any entity whose conduct willfully violated the statute. Robins alleged that false information regarding his finances and employment history were published in violation of the Fair Credit Reporting Act, however Robins did not allege that he suffered actual damages resulting from the publication. By suing, Robins provided a vital function to make sure the same conduct is not repeated causing actual damage to you or me. The key question is whether a statutory damage enacted by Congress can be used to establish a concrete injury and satisfy the constitutional requirement of standing. Although this may seem hyper technical, the significance cannot be overstated.
Since the 1970’s, as part of the final chapter in civil rights legislation, Congress has enacted a series of consumer protection statutes that provide individual consumers with a private right of action to protect themselves from overzealous greedy companies. These statutes also provide enforcement mechanisms by governmental agencies such as the Federal Trade Commission and Consumer Financial Protection Bureau. The private right of action component is the ultimate free market self-regulation mechanism because it empowers consumers to be industry watchdogs, incentivizes companies to adhere to the law, and prevents the Federal Government from having to grow and be burdened with the obligation of enforcement. This function is recognized in the statement of purpose for the Fair Credit Reporting Act which states “The banking system is dependent upon fair and accurate credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system…” and “[t]here is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” By providing a nominal statutory damage, right to recover costs and attorney fees, Congress incentivized every day American consumers to be watchdogs, to report and act upon their rights while having the natural effect of preventing injuries to other consumers and the public at large.
Demonstrating the consequences at risk in this case, there have been forty three amicus curiae briefs (friend of the court) filed by companies and organizations that are not parties to the case but are attempting to sway the Court. The overwhelming majority of the non-party briefs are submitted on behalf of corporations, and do not represent the consumer interest or good of the public. The Association of Credit and Collection Professionals argues in its brief for the Court to expand its ruling beyond the Fair Credit Reporting Act, stressing “this case’s implications go beyond the statute at issue and affect the credit-and-collection industry at every level.” The stakes are high. If the right to sue a company that violates federal law in the course of publishing or reporting credit information and recover a statutory damage for doing so is eliminated, the public will suffer. Enforcement obligations will be entirely on the shoulders of the Federal Government which does not have the man power, budget, or time to prevent individual violations that occur on a daily basis. Congress has empowered you and I, the consumer to play a vital role in maintaining a self-regulating free market banking and credit system. We know what happens when enforcement powers are relegated only to the Federal Government because we experienced it in 2008. With repercussions this significant, history will relegate Spokeo, Inc. v. Robins among the most important Supreme Court cases over the coming decades.