In a stunning decision, the Eleventh Circuit has just completely upended the traditional model for debt collection. In the case of Hunstein v. Preferred Collection & Management Services, the Appellate Court concluded that a debt collector that transmits account information, such as a consumer’s name and account balance, to a letter vendor for the purpose of generating an initial demand letter, violates the FDCPA. The effect of this decision is that the use of a letter vendor to generate and send any type of debt collection letter violates the law – at least in the states covered by the Eleventh Circuit (Florida, Alabama and Georgia).
In Hunstein, plaintiff complained that the debt collector violated §1692c(b) of the FDCPA by communicating personal information to a third party. Section 1692c(b) provides that, subject to several exceptions, “a debt collector may not communicate, in connection with the collection of any debt,” with anyone other than the consumer. Interestingly, the debt collector stipulated that the relaying of the account information to the letter vendor was a “communication,” and so, the only issue before the Court was whether that communication was “in connection with the collection of any debt.” In a very literal analysis of the statutory text, the Eleventh Circuit said it was, essentially because the sending of the data file was what allowed the letter to be created and sent.
And compounding the absurdity of this decision was the recognition by the Court that what they were doing turns the collection world on its head: “It is not lost on us that our interpretation of § 1692c(b) runs the risk of upsetting the status quo in the debt-collection industry” and that “[o]ur reading of 1692c(b) may well require debt collectors (at least in the short term) to in-source many of the services that they had previously outsourced, potential at great cost.” But this was not enough for the Court to change its mind, concluding that “[n]eedless to say, if Congress thinks that we’ve misread § 1692c(b)-or even that we’ve properly read it but that it should be amended-it can say so.”
If you are using a letter vendor currently to send any communications to consumers, it is time to rethink that strategy – at least in Florida, Alabama and Georgia. We are here to help navigate this new terrain.
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