Using a letter vendor is ruled an unauthorized third-party communication. What else then?
11th Circuit Court Ruling Opens an FDCPA Pandora’s Box of Consequences The U.S. Court of Appeals for the Eleventh Circuit delivered a very novel and consequential interpretation of the Fair Debt Collection Practices Act that could prove transformative for debt collectors and their third-party service providers. And while apparently focused on the collection agency industry, it’s application could have reaching effects to the repossession forwarding industry and perhaps the agencies themselves.
On April 21, 2021, the U.S. Court of Appeals for the Eleventh Circuit issued a decision on Hunstein v. Preferred Collection and Management Services, Inc., which on first impression, finds that a debt collector’s transmittal of a consumer’s personal information to its letter vendor constituted a prohibited third-party communication “in connection with the collection of any debt” within the meaning of section 1692c(b) of the Fair Debt Collection Practices Act (“FDCPA”). This ruling has broad ramifications for the accounts receivable management industry and will very likely usher in a new wave of FDCPA litigation.
This lawsuit originated from unpaid bills for medical treatment at a hospital. The hospital assigned the unpaid bills to a debt collector that had contracted with a third-party vendor for printing and mailing its collection letters. The collector electronically transmitted to its vendor certain information about the plaintiff/debtor such as:
- his status as a debtor, (2) the exact balance of his debt, (3) the entity to which he owed the debt, (4) that the debt concerned his son’s medical treatment, and (5) his son’s name.
The vendor then sent the information to generate and send a dunning letter to the debtor. The debtor received the letter and then filed a lawsuit in the Middle District of Florida alleging violations of both the FDCPA and the Florida Consumer Collection Practices Act.
The district court dismissed the lawsuit for failure to state a claim by concluding that the debtor had not sufficiently alleged that the collector’s transmittal of information to the letter vendor was a communication “in connection with the collection of a debt.” The debtor then appealed to the Eleventh Circuit.
The Eleventh Circuit court concluded that a violation of section 1692c(b) gives rise to a clear injury under Article III of the Constitution and found that the plaintiff did have standing to bring this lawsuit. The Eleventh Circuit then turned its focus onto whether the alleged communication was “in connection with the collection of a debt” such that it violated section 1692c(b).
The Eleventh Circuit rejected the debt collector’s “industry practice” argument that there is widespread use of mail vendors by debt collectors and a dearth of FDCPA cases against them. It commented that none of the cases cited by the debt collector involved Section 1692c(b) claims, the courts in those cases had no obligation to determine whether there was a Section 1692c(b) violation, and the fact that this case “is (or may be) the first case in which a debtor has sued a debt collector for disclosing his personal information to a mail vendor hardly proves such disclosures are lawful.”
In the courts decision, they stated: “We presume that, in the ordinary course of business, debt collectors share information about consumers not only with dunning vendors like Compumail, but also with other third-party entities. Our reading of § 1692c(b) may well require debt collectors (at least in the short term) to in-source many of the services that they had previously outsourced, potentially at great cost. We recognize, as well, that those costs may not purchase much in the way of “real” consumer privacy, as we doubt that the Compumails of the world routinely read, care about, or abuse the information that debt collectors transmit to them. Even so, our obligation is to interpret the law as written, whether or not we think the resulting consequences are particularly sensible or desirable.”
This interpretation of section 1692c(b) of the FDCPA is now wide open and by virtue of it’s being a circuit ruling, is the law of the land in the absence of any dissenting circuit or Supreme Court decisions.
While it has been argued many times that repossession agencies nor their employees are “Debt Collectors”, the question of whether a reinstatement of a repossession or the threat of repossession, as a form of leverage, are collections tactics?
Like it or not, with this new wide-open definition of communication “in connection with the collection of a debt” could find it’s way into areas of the repossession and remarketing industry previously unthought of.
I am not a lawyer. This is not legal advice and should not be considered as such. If you seek legal advice, find a practicing attorney. I’m not that guy!
Kevin
11th Circuit Court Ruling Opens an FDCPA Pandora’s Box of Consequences
Fair Debt Collection Practices Act – FDCPA
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