The Eleventh Circuit’s far-reaching decision in Hunstein v. Preferred Collection and Management Services, Inc. — which we previously covered on this blog — continues to raise questions for the wide range of industries that fall within the FDCPA’s definition of “debt collectors.” To put it briefly, the Eleventh Circuit held that a debt collector violates the FDCPA when it communicates with any third party — including a vendor or other party assisting with the collection or servicing of the loan — regarding the loan or debt.
One issue not considered by the Eleventh Circuit is whether the court’s interpretation of the FDCPA’s prohibition on disclosures to third parties renders the statute unconstitutional under the First Amendment.
Last year, in Barr v. American Association of Political Consultants — a decision we also covered on this blog — the Supreme Court applied the First Amendment to strike down an amendment to the Telephone Consumer Protection Act’s prohibition on robocalls. The TCPA banned nearly all robocalls to cell phones, but in 2015 Congress amended the law to permit robocalls made to collect a debt owed to or guaranteed by the United States. The Supreme Court held that this impermissibly restricted speech based on its content and struck down the government-debt exception.
Similar reasoning suggests that the incredibly broad interpretation Hunstein assigns to Section 1692c(b) of the FDCPA also violates the First Amendment. The Supreme Court has recognized that the First Amendment applies, albeit with more limited force, to commercial speech, which is an “expression related solely to the economic interests of the speaker and its audience” (Central Hudson Gas & Electric Corp. v. Public Service Commission of New York). Central Hudson laid out a test for restrictions on commercial speech. Commercial speech may always be regulated if it is misleading or concerns unlawful activity. Otherwise, the restriction is constitutional only if:
- The government asserts a substantial interest in support of regulation,
- The restriction “directly” advances that interest, and
- The regulation is narrowly tailored.
The Hunstein panel’s own words suggest that its interpretation of Section 1692 does not directly advance the privacy interests behind the FDCPA and that the statute is not narrowly tailored. The panel remarked that its interpretation “may not purchase much in the way of ‘real’ consumer privacy” because a mailing vendor likely does not “read, care about, or abuse” the debtor’s information. It also noted that the “resulting consequences” might not be “particularly sensible or desirable.” Finally, the panel noted that the plaintiff was unable to allege any tangible harm or even a risk of real harm.
These remarks by the Hunstein panel — which ring true — indicate that restricting FDCPA “debt collectors” (a group that may include a whole swath of loan servicers and other parties) from transmitting information about a debt to a vendor may be an unconstitutional limitation on commercial speech. This restriction does not appear to “directly advance” the interest behind Section 1692c(b): protecting a debtor’s privacy by forbidding harassment and outreach to his friends, neighbors, employers, or similar third parties. Further, this proposed restriction would not be “narrowly tailored” for the purpose of protecting debtors’ privacy. More nuanced regulations on a debt collector’s use of vendors could achieve privacy protection without bringing a radical upheaval to the debt collection and loan servicing industries.
As the financial services sector continues to monitor Hunstein and its implications, stay tuned to this blog for further discussion of the case.