Eighth Circuit Court of Appeals Holds Actual Damages Not Required to Confer Standing in EFTA Action

In Charvat v. Mutual First Federal Credit Union, 2013 WL 3958300 (8th Cir. Aug 2, 2013), the Eighth Circuit Court of Appeals held that actual damages in the form of an economic injury is not required to confer standing under the Electronic Fund Transfer Act ("EFTA"), 15 U.S.C. § 1693. The plaintiff sought statutory damages in a putative class action, alleging that the defendants failed to provide the required notices on their ATM's before charging him a transaction fee for withdrawing cash. The EFTA prohibits charging a transaction fee unless the ATM provides notice of the fee on both the screen of the ATM as well as on or at the actual ATM itself. The plaintiff received and accepted the on-screen warning at each ATM, but claimed that the ATM's did not contain the requisite "on machine" notice.

The defendants moved to dismiss based on lack of standing. The plaintiff claimed that he suffered the requisite "injury in fact" in the form of an informational injury caused by the defendants' failure to provide the statutorily required notice. However, the district court found that the alleged informational injury was merely an allegation of a statutory violation, which was insufficient to confer standing in itself. Accordingly, the district court dismissed the two companion cases for lack of standing.

On appeal, the Eighth Circuit reversed. The court recognized that there are "a variety of instances where the denial of a statutory right to receive information is sufficient to establish standing." Therefore, once the plaintiff "alleged a violation of the notice provisions of the EFTA in connection with his ATM transactions, he had standing to claim damages."

The appellate court also rejected the lower court's determination that statutory damages under the EFTA were unrelated to a consumer's injury, finding that "the statutory damages are given to a consumer who personally experiences a statutory violation," in contrast to instances where statutory damages are awarded to a plaintiff suing to vindicate the rights of a third party. Because the plaintiff personally experienced the defendants' failure to provide the requisite notices on the ATM's, he sufficiently alleged an action that injured him "in a concrete and personal way."

Finally, the court also found that the plaintiff's acceptance of the on-screen warning of the transaction fee did not eliminate the necessary element of causation. The court noted that if the defendants had not violated the notice requirement, the plaintiff "would not have been forced to choose between engaging in a transaction without the required notice and walking away." Accordingly, the court reversed the lower court's dismissal of the case.

The court's expansive interpretation of standing based on statutory damages alone is of particular import for the financial services industry, given the numerous statutes (such as the FDCPA, TCPA, RESPA and TILA) under which a plaintiff could potentially receive large statutory damages awards based on technical violations of a statute, without having suffered any actual damages.

For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.
Posted in: EFTA, Eighth Circuit
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