By: Jonathan L. Blackmore, Of Counsel
Fort Lauderdale, Fla. – April 22, 2021 – The Eleventh Circuit Court of Appeals ruled yesterday in Richard Hunstein v. Preferred Collection and Management Services, Inc. (The opinion can be accessed here) that a debt collector violated the Fair Debt Collection Practices Act’s prohibition against communicating consumers’ personal information to third parties in connection with the collection of any debt, by transmitting data to a mailing vendor which the vendor used to print and mail a dunning letter to the consumer.
The case stemmed from an unpaid medical bill arising from treatment to Hustein’s son, which a hospital assigned to Preferred Collections and Management Services, Inc. ("Preferred") for collection. Preferred sent a communication to a mailing vendor, CompuMail, to print and mail a dunning letter on its behalf to Hunstein. The communication included (1) Hunstein’s 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. Hunstein filed suit alleging that Preferred violated 15 U.S.C. §1692c(b), which broadly prohibits a debt collector from communicating with anyone other than the consumer "in connection with the collection of any debt," subject to several specific exceptions. The District Court dismissed the complaint with prejudice, finding that the communication with Preferred and its mailing vendor was not made "in connection with the collection of a debt" because the transmission from Preferred to CompuMail did not "have the objective of motivating someone to pay the debt." (The District Court’s ruling can be accessed here). Hunstein appealed the ruling to the Eleventh Circuit Court of Appeals.
The Eleventh Circuit began its analysis by determining whether Hunstein had Article III standing to sue. To establish standing, Hunstein was required to demonstrate "an invasion of a legally protected interest" that is both "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." While the court found that Hunstein could not show standing on the basis of a tangible harm, or a risk that is "substantial, significant, or poses a realistic danger", it found that Hunstein had standing by demonstrating a statutory violation. The Court drew analogies to cases involving invasions of personal privacy as a valid basis for tort suits and cited to Supreme Court precedent recognizing "the individual interest in avoiding disclosure of personal matters" and that "both the common law and the literal understandings of privacy encompass the individual’s control of information concerning his or her person". The Court held that §1692c(b) "bears a close relationship" to the invasion-of-privacy tort, which has traditionally been regarded as providing a basis for a lawsuit in American courts. It further found that Congressional intent favors a finding that violations of §1692c(b) provide standing to sue, because Congress identified the "invasion of individual privacy" as one of the harms against which the FDCPA is directed.
Having found that Hunstein had standing to sue, the Court then turned to analyzing whether the transmission of Hunstein’s personal information by Preferred to CompuMail constituted a violation of §1692c(b). The parties previously stipulated that Preferred is a "debt collector", that Hunstein is a "consumer" that the alleged debt was a "consumer debt", and that Preferred’s transmittal to CompuMail constitutes a "communication" within the meaning of the statute, which is defined as "the conveying of information regarding a debt directly or indirectly to any person through any medium". §1692a(2). Thus, the Court limited its analysis to whether the transmission of information from Preferred to CompuMail constituted a communication "in connection with the collection of any debt".
The Court first turned to the dictionary definition of "connection", which is defined as meaning "relationship or association" and "with reference to or concerning". It wrote that "[i]t seems to us inescapable that Preferred’s communication to CompuMail at least "concerned," was "with reference to," and bore a "relationship or association" to the collection of Hunstein’s debt. "We thus hold that Hunstein has alleged a communication in connection with the collection of any debt as that phrase is commonly understood." The Court thereafter rejected Preferred’s argument and the district court’s holding that "in connection with the collection of any debt" necessarily entails a demand for payment, because such an interpretation would render superfluous the exceptions set forth in §1692c(b) and §1692b. "In connection with the collection of any debt in §1692c(b) must mean something more than a mere demand for payment". "Under the district court’s demand-for-payment interpretation, Congress wouldn’t have needed to include exceptions for communications with consumer reporting agencies, creditors, attorneys of creditors, attorneys of debt collectors, or persons providing a debtor’s location information…" The court also explained that the district court’s holding that §1692c(b) requires there to be a "demand for payment" renders the statute’s use of the words "in connection with" meaningless.
Finally, the court acknowledged that its ruling runs the risk of disrupting the debt collection industry and that its ruling provided no benefit to consumer privacy. It also acknowledge the enormous short-term costs to the industry by moving many operations in-house. However, it held that it was required to interpret the law as written, and that Congress could amend §1692c(b) if it wished to do so.
What Now?
The ramifications of this holding are potentially great. It can be reasonably anticipated that there will be a spike in copy-cat lawsuits filed by consumer attorneys directed to servicers who utilize vendors in normal operations, such as mailing, and potentially even "door-knocks". Whether or not a servicer qualifies as a "debt collector" under the FDCPA is a fact-specific question, involving whether the mortgage was in default at the time servicing began. However, Florida’s version of the FDCPA: the FCCPA, is not limited to debt collectors. And while this decision is not based on the FCCPA, FDCPA opinions are considered persuasive authority in FCCPA cases. Thus, it can be reasonably anticipated there will be an increase in FCCPA complaints against servicers because of this ruling.
Until and unless this opinion is withdrawn on a motion for rehearing or overturned by the Supreme Court, servicers may be forced to contend with a spike in lawsuits and may need to consider moving many operations in-house for the states covered by the Eleventh Circuit: Florida, Georgia and Alabama.