On April 21, 2021, in a decision that threatens collector relationships with vendors, the Eleventh Circuit held that a debt collector’s transmittal of a consumer’s personal information to a mail house vendor constitutes a communication “in connection with the collection of any debt” to a third party, potentially in violation of the Fair Debt Collection Practices Act (FDCPA).
In Hunstein v. Preferred Collection & Mgmt. Servs, Hunstein alleged Preferred Collections & Management Services, Inc. (“Preferred”) violated the FDCPA after Preferred communicated Hunstein’s personal information concerning a hospital debt to Compumail, a mail house vendor. Preferred was assigned Hunstein’s debt and thereafter engaged Compumail to generate and send a collection letter to Hunstein. Preferred communicated to Compumail information such as Hunstein’s debtor status, the balance of debt, the hospital to which the debt was owed, the nature of the debt, and the name of Hunstein’s son who received the medical treatment giving rise to the debt.
The FDCPA at 15 U.S.C. § 1692c(b) states that “a debt collector may not communicate, in connection with the collection of any debt,” with anyone except the consumer, the consumer’s attorney, a consumer reporting agency, the creditor, the attorney’s creditor, or the debt collector’s attorney. The lower court dismissed the case, holding Hunstein insufficiently alleged that the communication between Preferred and Compumail qualified as a communication “in connection with the collection of any debt.”
On appeal, Hunstein argued that the plain meaning of the language proved that Preferred’s communication to Compumail was in connection with collection of his debt. Preferred urged the Court to adopt the factor-based analysis the Court has used when confronting the “in connection with the collection of any debt” language in § 1692e, the false or misleading representation prohibition of the FDCPA.
Finding merit in Hunstein’s plain meaning argument, the Court looked to the dictionary meaning of connection, defined as “relationship or association.” Further, the phrase “in connection with” means “with reference to [or] concerning,” and is “invariably a vague, loose connective.” Thus, the Court found that Preferred’s communication of Hunstein’s personal information to Compumail “at least “concerned,” was “with reference to,” and bore a “relationship [or] association” to its collection of Hunstein’s debt.”
Rejecting Preferred’s suggested factor analysis, the Court recognized that the Eleventh Circuit cases cited by Preferred did not concern § 1692c(b) but rather only § 1692e. In those cases, the Court adopted a test that determines whether a transmission of information to a third party violates § 1692e based on whether the communication makes an express or implied demand for payment. The Court also provided that § 1692e operates differently than § 1692c(b) because the former targets debt collector communications with a debtor whereas the latter targets debt collector communications with third parties.
Where does this leave collectors who use outside vendors like mail houses and skip trace services? The Court acknowledged that those relationships and the way the industry works may be upended by this decision but pushed those consequences to Congress. The decision is not effective until an official mandate issues from the 11th Circuit, which, barring any additional proceedings, is anticipated to be May 5th.
Preferred will likely seek an en banc rehearing of the decision given its significant importance to the industry which, if granted, would delay its effectiveness and perhaps overturn it. In the meantime, collectors should promptly consult with their counsel and develop strategies for mitigating the impact of this decision, should it stand.
*Aaron Parry contributed to this post.
A Partner at M&S, Josh advises clients on a range of proactive and responsive matters, helping them achieve their business goals while complying with federal and state privacy and other consumer protection laws.