Debt collector asks 11th Cir. for en banc review of decision applying FDCPA restriction on third-party communications to debt collector’s transmittal of debtor’s personal information to letter vendor

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Last month, in a very troubling decision of first impression, a unanimous panel of the U.S. Court of Appeals for the Eleventh Circuit reversed the lower court’s dismissal of the plaintiff’s FDCPA claim, instead ruling that the plaintiff stated a claim where the plaintiff alleged that a debt collector’s transmittal of the plaintiff’s personal information to the vendor it used to generate and send collection letters “constituted a communication ‘in connection with the collection of any debt’ within the meaning of [FDCPA Section 1692c(b)].”  That provision generally prohibits a debt collector from communicating with anyone other than the debtor and certain specified third-parties “in connection with the collection of any debt” without the debtor’s consent, court permission, or to effectuate a postjudgment judicial remedy.  The panel’s decision in Hunstein v. Preferred Collection and Management Services sent shockwaves through the debt collection industry because of its potential broad reach beyond letter vendors to any service provider that receives from a debt collector that discloses a consumer owes a debt.  This past Tuesday, Preferred Collection and Management Services (“Preferred”) filed a petition for rehearing en banc with the Eleventh Circuit.

Before reaching the merits of the plaintiff’s FDCPA claim, the Eleventh Circuit panel considered whether the plaintiff had Article III standing to sue.  In its discussion of applicable law, the panel indicated that a concrete injury sufficient to establish standing can be shown where intangible harm is closely related to a harm that has traditionally been regarded as a basis for a lawsuit in English or American courts.  It observed that invasions of personal privacy claims, which include public disclosure of private facts, have traditionally been regarded as a valid basis for tort suits in American courts.  According to the panel, the FDCPA violation alleged by the plaintiff satisfied this standard because it was analogous to a claim of public disclosure of private facts.  In addition, the panel found that because Congress, in the FDCPA section on Congressional findings and statement of purpose, identified the invasion of individual privacy as one of the harms against which the FDCPA is directed, “Congress’s judgment” indicated that violations of Section 1692c(b) constitute a concrete injury.  Accordingly, the panel concluded that the plaintiff had standing because the FDCPA violation that he alleged constituted a concrete injury.

In its petition for rehearing en banc, Preferred contends that the panel’s conclusion that the plaintiff had Article III standing is incorrect.   In support of that position, Preferred makes the following principal arguments:

  • The decision deviates from other Eleventh Circuit precedent that holds that for Article III standing to exist, there must be a finding that the plaintiff’s alleged injury was particularized or personal.  In fact, the panel expressed doubt that the harm alleged by the plaintiff occurred or was likely to occur.
  • Preferred’s electronic transmission of data to a private server maintained by its agent does not constitute the public disclosure of private facts.  Instead, it is “the antithesis of ‘public’ disclosure” because “[t]he consumer has the only set of human eyes that sees the information actually contained in the letter.”
  • The FDCPA’s legislative history indicates that it “was enacted to prohibit abusive debt collection practices that can lead to an invasion of privacy ‘without imposing unnecessary restrictions on ethical debt collectors.’” The electronic transmission of data to a private server maintained by the debt collector’s agent for the purpose of facilitating the mailing of a letter to the consumer is not abusive.  By expressly recognizing in the FDCPA the use of telegrams to transmit information to a consumer, Congress has set forth “its express approval of the ministerial use of ‘third-party agents’ for the purposes of facilitating non-abusive communications with a consumer.”
  • The Colorado Supreme Court has ruled that the use of an automated mailing service did not violate the Colorado state equivalent of FDCPA Section 1692c(b).
  • The panel’s opinion is inconsistent with the CFPB’s final debt collection rule which acknowledges without objection that many debt collectors use letter vendors.

We anticipate a flood of related amicus filings in the coming days.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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