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Eleventh Circuit Court of Appeals Drastically Impacts Traditional Debt Collection Practice Model in FDCPA Ruling
Eleventh Circuit Court of Appeals Drastically Impacts Traditional Debt Collection Practice Model in FDCPA Ruling

The Eleventh Circuit Court of Appeals recently held in Hunstein v. Preferred Collection & Mgmt. Servs., 994 F.3d 1341 (11th Cir. 2021), that a defendant debt collector violated the Fair Debt Collection Act (FDCPA) by communicating information about an underlying debt to vendors or third parties it utilized in its collection efforts. This ruling, which involves an issue of first impression, has the potential to drastically interrupt and alter the traditional debt collection practice, including that of attorney’s pursuing the rights of various creditors.

In Hunstein, the defendant transmitted certain information to a third party commercial mail vendor used as part of the transmission of collection communications. The Court found that the sharing of information violated the privacy protections afforded under Section 1692c of the FDCPA, which restricts the transmission of information concerning a debt to other individuals or entities. The traditional high-volume debt collection model often relies on the use of vendors and servicers to assist in the distribution of collection communications, the identification of assets, tracking payments and balances and processing telephone communications. As part of those outsourcing services, certain information must be shared regarding the underlying debt such as names, addresses, balance information and account numbers.  Post Hunstein, a debt collectors’ dissemination of the required information may amount to a de facto violation of the FDCPA, subjecting the party to statutory penalties, fee shifting and class liability.  The panel recognized this industry-changing impact, noting that its decision “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” and “that these costs may not purchase much in the way of ‘real’ consumer privacy, as we doubt that [mail vendors] routinely read, care about, or abuse the information that debt collectors transmit to them.” Huntstein,  994 F.3d at 1352.

The defendant also argued that even if a technical violation occurred, the non-public disclosure of information to the vendor did not cause any actual harm or injury and therefore the plaintiff lacked Article III standing to present her claims, as established in Spokeo v. Robins, 135 S. Ct. 1540 (2016).  These arguments were rejected as well. The Court found that no actual injury was required because the acts violated a right to privacy expressly acknowledged by Congress.

The Defendant has requested rehearing en banc, and more than a dozen amicus briefs have been filed as of July 1, 2021.

Hunstein v. Preferred Collection & Mgmt. Servs., 994 F.3d 1341 (11th Cir. 2021).

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