CFC How Standing Can Make or Break Certification

In our Consumer Finance Compass series, Balch’s Jason Tompkins offers a preview of his upcoming presentation for the Association of Credit & Collection Professionals (ACA) Convention 2025, titled “Class Action Lawsuits in Debt Collection: Lessons & Prevention.” 

Jason explores how standing, the legal right of the plaintiff to sue based on establishing an injury caused by the actions of the debt collector, can determine whether a class action advances past certification and explains the growing divide among courts on this pivotal issue. Using recent case law, including Lezark v. IC Systems, Jason illustrates how standing challenges can reshape litigation strategy from the outset.

This episode dives into how standing arguments can be used strategically to limit or defeat class certification—potentially reducing litigation exposure, controlling settlement leverage, and protecting companies’ bottom line.

Balch & Bingham has unparalleled experience navigating the complex regulatory sphere that is consumer finance.  Reach out to Jason or any member of our Consumer Finance Compliance & Defense Practice to discuss the evolving regulatory landscape and its impact on your business.

Consumer Finance Compass

Hosted by Balch & Bingham’s Jason Tompkins, Consumer Finance Compass is a video series navigating the latest issues in the complex regulatory sphere that is consumer finance. Jason is a partner in the firm’s Birmingham office and a member of the Consumer Finance Compliance & Defense Practice.

Transcript

Jason Tompkins:

Class actions are on the rise. Is your business ready to protect itself? Hi, I'm Jason Tompkins, a member of Balch's Consumer Finance Compliance and Defense Practice. Debt collectors are frequent targets of class actions under the Fair Debt Collection Practices Act, Fair Credit Reporting Act, and Telephone Consumer Protection Act, and the stakes are higher than ever. This is a big topic, which is why I'm preparing a presentation for ACA's Annual Convention July 23rd-25th. In this special edition of Consumer Finance Compass, we're going to delve into just one of the issues that we'll be discussing at the ACA Annual Convention.

Today, we're going to talk about the intersection of class actions with another legal concept that's at the forefront of a lot of cases, standing. And standing is not just a legal technicality. Standing can determine whether a class action ever gets off the ground, and if so, the scope of the class, which ultimately determines the litigation risk, exposure, and bottom line for your business. Standing, as you may recall, is the plaintiff's ability to maintain an action in federal court. In prior episodes of Consumer Finance Compass, we've discussed several aspects of standing, most notably the requirement that a plaintiff allege a concrete injury from the defendant's actions. The debate we're going to talk about today has its origins in the US Supreme Court's 2021 decision of TransUnion V. Ramirez. In that case, the US Supreme Court decided that plaintiffs must have standing in order to recover damages from a defendant.

While TransUnion held the plaintiffs must demonstrate standing, the question it left open is whether class members' lack of standing precludes class certification in the first place, whereas just the damages issue to be taken up after class certification. This is not an academic question. The inclusion of class members who lack standing, in other words, those who are uninjured creates an over broad class and the scope of the class often alters the party's negotiation positions and decisions about whether to proceed with the litigation. The courts are split on how to handle this issue. Some courts have held that a class cannot be certified unless the plaintiff can demonstrate that all class members have standing. On the other end of the spectrum, courts have held that only the named class representative must demonstrate standing at the class certification stage and other courts have forged a middle ground holding that class certification will not be denied unless it has shown that more than a de minimis number of class members do not have standing.

A recent district court decision from the Western District of Pennsylvania illustrates how this can play out. In Lazarek v. IC Systems, ICS sent the plaintiff a collection letter regarding a medical debt. The plaintiff alleged that letter was misleading because it implied that ICS could seek legal actions when in fact it could not. The court had concluded early in the case that the plaintiff, the class representative, had sufficiently alleged standing by alleging that he had suffered emotional distress and filed bankruptcy in response to ICS's letter anticipating standing arguments to class certification, plaintiff's counsel sent a questionnaire to all putative class members. The questionnaire provided five different consequences that the class members may have experienced in response to the letter such as feeling stressed or making a payment and ask them to check a box if any of those circumstances apply to them.

The court held that the putative class member's responses to the questionnaire was enough to make a prima facie showing of standing, but ultimately held that more was required. The question according to the court is whether it is likely they can establish through summary judgment and trial that they have standing without the need for the court to resolve individualized questions that would overwhelm common questions. Where the alleged injury is emotional distress, the court concluded it would need more than a checkmark. And because the plaintiff could not offer a straightforward method for ascertaining standing on the back end, class certification was denied. That case is now an appeal to the Third Circuit, but a circuit split already exists. In fact, last term, the US Supreme Court granted cert in LabCorp V. Davis to address the question of whether class members must have standing. Ultimately, though, it never reached that decision. Last month, it denied the writ as improvidently granted.

Justice Kavanaugh, who authored the decision in TransUnion V. Ramirez, dissented from the court's dismissal of the petition in LabCorp. He would hold that a class consisting of both injured and uninjured members cannot possibly satisfy the requirement the common questions of law, in fact, predominate. In other words, lack of standing, would preclude class certification on the front end. As we head into the ACA convention, keep an eye out for how standing decisions are affecting the class action landscape. The outcome of these decisions can provide a roadmap for your strategy when you're faced with the class action. At the ACA convention later this month, we'll take a deeper dive into this and other issues including class settlement issues, mass arbitration issues, and defense strategies if you're faced with a class action. I hope you'll stop by and see us at the ACA convention. I'm Jason Tompkins. Thanks for joining me for this special edition of Consumer Finance Compass. We'll see you in Louisville.