Eleventh Circuit Upends Debt Collection Industry Likely Leading to Wave of Class Action Litigation

The Fair Debt Collection Practices Act (FDCPA) gives consumers crucial protections against predatory debt collection practices, such as calling late at night, using harassing language, pursuing individuals for debts they don’t owe, and using misleading communications in debt collection attempts. The FDCPA governs the practices of third-party debt collectors, those who buy a delinquent debt from original creditors, like medical providers or credit card companies.

A common practice of these third-party debt collectors is to outsource parts of its debt-collection operations to various vendors. In an apparent issue of first impression, the Eleventh Circuit considered whether the FDCPA applies to communications between a third-party debt collector and its vendors. The FDCPA prohibits debt-related communications about a consumer with third parties without the consumer’s consent or a court order. Thus, the issue for the Eleventh Circuit was whether communications between a debt collector and its vendors constituted debt-related communications about a consumer in violation of the FDCPA. In a decision that has the potential to upend the debt collection industry, the Eleventh Circuit ruled that such communications were in fact governed by the FDCPA. A likely result of this decision will be a wave of FDCPA class action lawsuits, particularly in the states within the Eleventh Circuit (Alabama, Florida and Georgia).

In Richard Hunstein v. Preferred Collection and Management Services, Inc., the defendant debt collector, Preferred Collection and Management Services, sent certain information about the plaintiff’s debt, including (1) the plaintiff’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, to a commercial mail vendor called Compumail. Under its arrangement with Preferred Collection, Compumail would use the information provided by Preferred Collection to create, print, and mail initial debt collection letters, commonly referred to as “dunning letters,” to consumers.

Hunstein sued Preferred Collection, claiming that its transmittal of his private information to Compumail constituted a violation of FDCPA Section 1692c(b) which concerns third-party communication and provides in relevant part that:

Without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than 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.

The Preferred Collection sought dismissal of the suit by arguing that its communication with Compumail did not violate Section 1692c(b) of the FDCPA because the communication did not qualify as a communication “in connection with the collection of a debt.” The district court agreed and dismissed the lawsuit. Hunstein then appealed the dismissal to the Eleventh Circuit Court of Appeals.

In reversing and remanding the district court’s dismissal of Hunstein’s claims, the Eleventh Circuit reasoned that Preferred Collections’s transmission of Hunstein’s information to Compumail was a communication “in connection with the collection of any debt” and that Compumail was a third party. Having made these determinations, the Court reasoned that Preferred Collection violated Section 1692c(b) of the FDCPA.

In reaching the conclusion that Preferred Collection’s communication to Compumail constituted a communication “in connection with the collection of any debt” within the meaning of Section 1692c(b), the Court turned to the dictionary definition of the word “connection” and the phrase “in connection with.” The Court noted that these definitions were broad and that “connection” meant “relationship or association” and the phrase “in connection with” meant “with reference to or concerning.” Given these expansive definitions, the Court found it “inescapable” that Preferred Collection’s communication to Compumail at least “concerned,” was “with reference to,” and bore a “relationship or association” to its collection of Hunstein’s debt. Thus, the finding that Hunstein had alleged a violation of the FDCPA was a natural conclusion based on the Court’s findings.

The Court ended its opinion by acknowledging that it was “not lost” on the three-judge panel that “[their] interpretation of § 1692c(b) runs the risk of upsetting the status quo in the debt-collection industry” and the effect of their ruling “may well require debt collectors (at least in the short term) to in-source many of the services that they had previously outsourced, potentially at great cost.” The Court further acknowledged that the ruling “may not purchase much in the way of ‘real’ consumer privacy” as it is unlikely that these vendors routinely read, care about, or abuse the information that debt collectors transmit to them. Nonetheless, the Court concluded that it is “our obligation to interpret the law as written, whether or not we think the resulting consequences are particularly sensible or desirable.”

Practitioners expect that, at least in the Eleventh Circuit’s jurisdiction, the ruling will lead to a marked uptick in class-action FDCPA cases based upon debt collector’s prior, or continued, practice of sending debt-related information to third-party vendors.

The Court’s full opinion is available here.

Our DuPage and Cook County class-action litigation firm handles individual and class-action consumer protection claims involving unfair debt collection, predatory lending, privacy rights, deceptive advertising, data breaches, gift cards, lemon law, and other consumer rights cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totaling millions of dollars returned to consumers and over a million dollars donated to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs.

The Chicago class action lawyers at Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations to obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices. You can see a description of some of the many individual and class-action consumer cases our Chicago consumer lawyers have handled. You can contact one of our Chicago and Wheaton class action attorneys by filling out the contact form at the side of this blog or by clicking here. You can also call us at 630-333-0333.

Contact Information