Compliance issue: 11th Cir. Holds Disclosure of Consumer Information to Third Party Letter Providers Violates FDCPA


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On April 21, the United States Court of Appeals for the Eleventh Circuit ruled that the transmission of consumer information to a letter seller constitutes communication with an unauthorized third party in connection with the debt collection. ‘a debt in violation of 15 USC § 1692c (b). The court’s decision in Hunstein v. Preferred Collection and Management Services, Inc. is available here.

The facts are relatively straightforward. The collector electronically transmitted information about the consumer and his debt to his letter seller, who then used that information to create and send a letter to the consumer.

Standing to present claim 1692c (b)

Before examining the merits of the consumer’s claim, the court determined whether the consumer had standing to pursue this claim. The court noted that the consumer could not establish standing on the basis of tangible harm because he did not allege one. Nor has the consumer been able to establish a position based on an imminent risk of material harm. Therefore, the court considered whether the consumer was able to identify a violation of the law that gave rise to intangible harm, but still concrete.

In determining whether a violation of the law confers Article III status, courts consider the history and judgment of Congress. After reviewing the history of American and English common law, the court concluded that the alleged harm was sufficiently analogous to the tort of invasion of privacy. The court also found that the Congressional ruling supported standing because “invasions of individual privacy” were among the harms Congress explicitly targeted when passing the FDCPA.

You may recall that the Eleventh Circuit recently examined whether a consumer had standing to assert claims under paragraphs 1692e and 1692f regarding the absence of a notice of revocation of limitation period in a collection letter. Trichell v. Midland Credit Mgmt., Inc., 964 F.3d 990 (11th Cir. 2020). The court in Trichell ruled that the consumer had no standing to pursue these claims because, among other things, he had not been misled by the letter.

The court distinguished its decision in Trichell by explaining that the claim of § 1692e invoked in this case had an insufficiently close link with the most similar common law offense (fraudulent or negligent declaration). Further, there is no evidence that Congress intended to deal with, as the court said in Trichell, “Misleading communication[s] who do not deceive. However, Congress specifically identified privacy breaches as one of the harms against which the FDCPA was directed. Accordingly, the court found that the consumer had standing to pursue his claim under § 1692c (b).

Providing information to a letter seller indicates a claim under 1692c (b)

Turning to the merits of the consumer’s claim, the court noted that the collector did not dispute that his transmission of information to the seller of the letter was a “communication” as that term is defined in 15 USC § 1692a (2). This concession meant that the court had only to decide whether this disclosure had been made “in connection with the collection of any debt” in violation of 15 USC § 1692c (b). The court first determined that the expression “in connection with” and the word “connection” are both broadly defined and only require a relationship or association. From this, the court came to the “inevitable” conclusion that the transmission of data by the collector (including the name of the consumer, the name of the creditor and the account balance) to the seller of the letter was related or associated. to the consumer debt and, therefore, was “in connection with the collection” of that debt.

The collector made three arguments in support of his position that the transmission to his letter seller was not “in connection with the collection of a debt”. The court rejected all three. The collector first argued, citing earlier decisions of the Eleventh Circuit, that a communication is not related to the collection of a debt unless it includes a demand for payment. The court rejected this argument and explained that its previous cases involving such a requirement concerned alleged violations of § 1692e, not § 1692c (b). The court also noted that § 1692c (b) contains exceptions for communications with certain third parties, such as credit bureaus, to which no request for payment would be made. These exceptions would be redundant if a communication were to include a demand for payment “in connection with the collection of any debt” under § 1692c (b).

The Collector then argued that the Eleventh Circuit should apply a multifactor balancing test used by the Sixth Circuit to assess whether a communication was “related to the collection of a debt” under § 1692e. The court again noted the linguistic and operational differences between § 1692e and § 1692c (b) in rejecting this argument.

The conundrum of compliance

At the risk of oversimplifying the third argument, the collector essentially argued that many debt collectors use letter sellers, but no court decision has ruled that the use of letter sellers violates the FDCPA. . In rejecting this argument, the court observed that this case could be the first to decide whether a collector violates § 1692c (b) by passing information to a letter seller.

The court understood that its interpretation of § 1692c (b) “risks upsetting the status quo in the debt collection industry”, that it could be extended beyond the use of letter sellers, and that it “may well require collection agents (at least in the short term) to in-house many services that they had previously outsourced, potentially at a high cost. However, the court ruled that the plain language of the law required it to rule.

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