On April 21, 2021, in a matter of first impression, the United States Court of Appeals for the Eleventh Circuit held that consumers may assert a claim under Section 1692c(b) of the Fair Debt Collection Practices Act (the “FDCPA”) for a debt collector’s transmittal of a consumer’s personal information to a third-party. This case, Hunstein v. Preferred Collections & Mgmt. Servs., Inc., No. 19-14434, 2021 U.S. App. LEXIS 11648 (11th Cir. Apr. 21, 2021), has the potential to dramatically alter debt collectors’ standard business practices. Debt collectors should closely analyze their relationships with third-party vendors and consider the possibility of keeping collection practices in-house or operating these practices through outside counsel to avoid running afoul of the FDCPA.
The facts in Hunstein are simple. Richard Hunstein incurred a debt arising out of his son’s medical treatment at a hospital. The hospital assigned the debt to Preferred Collections & Management Services, Inc. (“Preferred”), which hired an entity named Compumail to handle debt collection and the preparation of a “dunning” letter. Such letters notify consumers that they are overdue in paying an account receivable.
Preferred transmitted information to Compumail regarding Mr. Hunstein, including: (1) his status as a debtor, (2) the 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. Compumail used the information to send a dunning letter to Mr. Hunstein.
Mr. Hunstein filed suit against Preferred alleging its transmittal of this information to Compumail constituted a violation of 15 U.S.C. § 1692c(b), which, subject to certain narrow exceptions, prohibits debt collectors from communicating with third parties “in connection with the collection of any debt.” The listed exceptions are “the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector,” none of which applied to Compumail. The district court dismissed the suit for failure to state a claim, holding Preferred’s transmittal to Compumail did not qualify as a communication “in connection with the collection of any debt.”
The Eleventh Circuit considered whether Mr. Hunstein had standing to assert a claim under Section 1692c(b) and determined Mr. Hunstein had standing based on a violation of this statutory provision giving rise to an “intangible-but-nonetheless-concrete” injury. After analyzing claims asserting invasions of personal privacy and the FDCPA’s express declaration that “invasions of individual privacy” are among the harms against which the statute is directed, the Eleventh Circuit held Mr. Hunstein had standing to assert his claim.
The Eleventh Circuit held it was “inescapable” that the transmittal from Preferred to Compumail constituted a communication “in connection with the collection of any debt.” The Court further held that requiring a communication to include a demand for payment for it to be “in connection with the collection of any debt” would render the exceptions of Section 1692c(b) superfluous. The Court also noted that Section 1692(e) targets communications with the consumer while Section 1692c(b) targets communications with third parties. Finally, the Court rejected Preferred’s “industry practice” argument that it commonly shares information regarding consumers with third-party vendors, holding its obligation is “to interpret the law as written” regardless of the associated costs.
Putative class actions asserting claims under Section 1692c(b) have been filed against debt collectors in the Northern District of Alabama. We expect additional putative class actions against debt collectors to be forthcoming. Hunstein serves as a warning: be very careful what you do with the information of a consumer who may be indebted to you.
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