Consumer Finance Litigation

The ruling by the Eleventh Circuit Court of Appeals in Richard Hunstein v. Preferred Collection and Management Services, Inc. raises significant concerns for debt collectors who use vendors for mailing and other types of services that require the sharing of information relating to consumer debts. By ruling that such arrangements can violate the prohibition on sharing information about consumer debts with third parties under section 1692c(b) of the Fair Debt Collection Practices Act ("FDCPA"), the panel’s decision has forced many debt collectors to rethink existing business practices. To make matters worse, the Eleventh Circuit has held that such violations are actionable even without concrete economic damages, raising the specter of attorney’s fee-driven litigation about vendor relationships that have no connection to any kind of particularized consumer injury.

Fortunately, the debt collector in Hunstein has now moved for rehearing en banc of the panel’s decision, arguing that it is contrary to the United States Supreme Court’s ruling in Spokeo, Inc. v. Robins and prior decisions of the Eleventh Circuit interpreting the FDCPA.

The Spokeo decision examined the concept of Article III standing in the context of the Fair Credit Reporting Act ("FCRA"), and found that a purely technical violation of a consumer protection statute is not actionable absent a particularized and concrete injury caused by the violation. In Hunstein, the panel decision did not analyze whether Hunstein’s injury was particularized or concrete. Indeed, the panel decision alludes to the fact that the violation in Hunstein did not cause any such injury. However, the Eleventh Circuit held that Hunstein could maintain suit because the purported violation infringed upon a generalized right to privacy which undergirds the prohibition in the FDCPA on most third-party disclosures by debt collectors.

The debt collector in Hunstein also argues that the panel’s decision ignores that the type of third party disclosure at issue in the Hunstein case is not the type of disclosure that either Congress or the Eleventh Circuit has historically viewed as prohibited by the FDCPA. Specifically, the debt collector in Hunstein argues that the transmittal of consumer information to a private computer server maintained by a mailing vendor is little different than the use of telegram services, which the FDCPA specifically contemplates, and other types of benign communications services.  The debt collector argues that such services do not implicate the type of abusive public or third party disclosures the FDCPA was created to prevent – such as advising a consumer’s family and friends of the nonpayment of a debt to shame or humiliate the consumer.

It remains to be seen if the Eleventh Circuit will rehear the Hunstein case – and whether such rehearing can alter the result of the appeal. While the petition for rehearing remains pending, the Court’s original decision of April 26, 2021 remains in place.  The decision has the potential to force businesses whose activity is (or can be) construed as debt collection to reconsider the use of mailing vendors, and other types of outsourcing that involve sharing information about consumer debts.