The Eleventh Circuit in Hunstein v. Preferred Collection and Management Services, Inc. may have changed forever how financial services companies collect debt by requiring debt collectors to bring routine services such as the mailing of dunning letters in house. The fact that this shift may prove quite costly did not escape the Court’s notice. “Our reading of § 1692c(b) may well require debt collectors (at last in the short term) to in-source many of the services that they had previously outsourced, potentially at great cost.” USCA11 Case: 19-14434, p. 34 (October 28, 2011). The fact that this costly and time consuming shift in the industry may not purchase much in the way of real consumer privacy, was not a factor the court found persuasive. Id.
The facts of Hunstein, In summary, are as follows. Preferred Collection and Management Services, Inc., a debt collector, electronically transmitted private information such as the consumer’s name, outstanding balance, and the fact that the debt arose from his minor son’s medical treatment to a third party commercial mail vendor to handle the collection. The vendor then used that information to create, print and mail a collection letter to the consumer. The consumer filed suit claiming that in sending his private information to their vendor, the debt collector violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692c(b). The district court dismissed the case for failure to state a claim because the transmittal of information to the third party vendor did not qualify as a communication “in connection with the collection of any debt.” Id. at 5.
While this statutory interpretation harmonizes with the prevailing reading of the Fair Debt Collection Practices Act ("FDCPA"), the Eleventh Circuit issued a landmark opinion reversing the lower court and sending the case back for further proceedings. In doing so the court found that Preferred’s transmittal to its vendor details includes the precise amount of debt and the entity to which it was owed, “at least ‘concerned,’ was ‘with referenced to,’ and bore a ‘relationship [or] association’ to its collection of Hunstein’s debt.” Id. at 35. A finding that was repudiated by the dissent because a “simple transmission of information along a chain that involves on extra link because a company uses a mail vendor to send out the letters about debt is not a harm at which Congress was aiming.” Id. at 61.
Now we await the inevitable appeal to the Supreme Court for their take on this issue. Please reach out to Gordon & Rees if you are seeking counsel on this legal development.