To start with the headline, on April 21, 2021, the Eleventh Circuit Court of Appeals held that a debt collector sending personal identifying information to dunning letter vendors states a claim under the Fair Debt Collection Practices Act (FDCPA). To boot, an allegation that such activity occurred is sufficient to show a concrete injury conferring standing. Obviously, the decision will have far-reaching implications for the ARM industry and anyone in the debt collection space. A deeper dive on the decision—Hunstein v. Preferred Collection—shows how.
Preferred Collection and Management Services, Inc. sent data to Compumail, a third-party commercial mail vendor, concerning a debt owed by Richard Huntstein, including Huntstein’s name, his outstanding balance, the name of the original creditor, the fact that his debt resulted from Hunstein’s son’s medical treatment, and his son’s name. Compumail used the data to create, print, and mail a dunning letter to Huntstein. After receipt, Huntstein filed suit in the United States District Court for the Middle District of Florida alleging that Preferred Collection had violated section 1692c(b) of the FDCPA by sending his information to Compumail.
Section 1692c(b), with certain exceptions, prohibits debt collectors from communicating “in connection with the collection of any debt, with any person other than the consumer”. And the District Court dismissed Huntstein’s complaint, finding that Preferred Collection’s transmittal of Huntstein’s data to Compumail did not constitute a communication “in connection with the collection of any debt.”
On appeal, the Eleventh Circuit first addressed the issue of whether Huntstein had Article III standing. Tracing the “historical pedigree of invasion-of-privacy torts—in particular, the sub-species applicable to the public disclosure of private facts,” the Court held that Huntstein had sufficiently alleged a concrete injury under section 1692c(b) of the FDCPA, which, it found, bore a close relationship with the invasion-of-privacy tort. Therefore, the Court held, Huntstein had standing to assert his claims.
The Court then turned the 1692c(b) issue. There, Preferred Collection argued that transmittal of Hunstein’s information to Compumail failed to include a demand for payment, which some courts have held is a required element to FDCPA-regulated communications in other portions of the statutes, such as 1692e. As such, sending information to a letter vendor was not a communication “in connection with the collection of any debt” within the meaning of section 1692c(b). The Court disagreed. Because the parties did not contest that the transmission of information is a communication, and Preferred Collection made that communication as part of its business process aimed to collect from Hunstein, that’s all the Court needed to know. The Court further declined to apply to section 1692c(b) the Sixth Circuit’s ruling in Goodson v. Bank of Am., 600 F. App’x 422 (6th Cir. 2015), which set forth a “holistic, multi-factoring balancing test” for determining whether a communication is one “in connection with the collection of any debt” under section 1692e. Rather, the Court simply looked to the language of 1692c(b).
When faced with the implications of its decision, the Court downplayed Preferred Collection’s policy arguments, which it marked as “industry practice” arguments. The Court recognized that its opinion “runs the risk of upsetting the status quo in the debt-collection industry” and that the “great cost” imposed by its ruling “may not purchase much in the way of ‘real’ consumer privacy.” The Court’s “obligation is to interpret the law as written, whether or not we think the resulting consequences are particularly sensible or desirable,” the Eleventh Circuit noted. Any undesirable consequence of that language, it concluded, is an issue to take up with Congress.
The Eleventh Circuit’s decision in Huntstein breaks new ground for the debt collection space. It turns a ubiquitous and accepted business practices into a potential violation of the FDCPA. Indeed, in the wake of Huntstein, class actions have already been filed in the Eleventh Circuit based on the use of letter vendors. Although Huntstein will have an immediate effect on the ARM industry, it is not the final word. Not only does Preferred Collection have the opportunity to seek en banc review, but it also chose not to make some arguments for dismissal under Rule 12(b)(6). And even if it had, the posture of Hunstein means only that allegations of such conduct state a claim, not that they will necessarily succeed on the merits. After further factual development of the record, it may very well turn out that the specific relationship with, information transmitted to, and processes used by letter vendors yield a different result under section 1692c(b).