September 13, 2022
The debt collection industry received some good news recently regarding the case of Hunstein v. Preferred Collection and Management Services. On September 8th, the 11th Circuit Court of Appeals dismissed a claim alleging that a collection agency violated the Fair Debt Collection Practices Act (FDCPA) by using a third-party vendor to print and mail its collection notices.
The saga of this case began in 2019, when Mr. Hunstein’s claim was dismissed by a US District Court in Florida. That court noted that the transmission of information to a vendor did not constitute a “communication in connection with the collection of a debt” under the FDCPA. After Mr. Hunstein appealed that decision to the 11th Circuit Court of Appeals, a three-judge panel reversed the District Court and held that the collection agency violated the FDCPA by disclosing his debt to a third party (the letter vendor). Despite the fact that a letter vendor processes thousands and thousands of letters each day and it couldn’t possibly review the individual contents of those letters, the three-judge panel found that the collection agency violated the FDCPA’s prohibition on third-party disclosure and that Mr. Hunstein had suffered adequate injury to maintain his lawsuit in federal court.
Shortly after that ruling, the collection agency filed a request for the entire 11th Circuit Court of Appeals to rehear the case. The court granted that request and it heard oral argument in February of this year. After months of waiting, the court finally reached its conclusion and reaffirmed the industry’s position that the letter vendor theory at issue in this case simply lacks merit. As the court noted, Mr. Hunstein’s own counsel admitted during oral argument that there was no evidence anyone at the letter vendor actually saw or read information about his debt – merely that the information passed through the vendor and they had access to it. The court explained that transmitting information that no one actually reads cannot provide the basis for a third-party disclosure lawsuit. As the majority opinion states, “[a]t bottom, Hunstein is simply no worse off because [the collection agency] delegated the task of populating data into a form letter to a mail vendor.”
This case presents a win for the entire collection industry and continues a trend where federal courts are showing a willingness to dismiss lawsuits where there are no allegations that anyone was harmed by the conduct at issue. You can read more about the Hunstein case here: https://www.bhfs.com/insights/alerts-articles/2022/hunstein-decision-informs-financial-services-industry-use-of-third-party-vendors
Wade Isbell
Chief Compliance Officer and General Counsel
Professional Credit