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Financial Services Law Insights and Observations

11th Circuit: Outsourcing debt collection letters can violate FDCPA

Courts Debt Collection Third-Party Disclosures Appellate Eleventh Circuit Vendor Hunstein

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On April 21, the U.S. Court of Appeals for the Eleventh Circuit held that transmitting a consumer’s private data to a commercial mail vendor to generate debt collection letters violates Section 1692c(b) of the FDCPA because it is considered transmitting a consumer’s private data “in connection with the collection of any debt.” According to the opinion, the plaintiff’s medical debt was assigned to the defendant debt collector, who, in turn, hired a mail vendor to produce a dunning letter in the course of collecting the outstanding debt. In order to produce the letter, information about the plaintiff was allegedly electronically transmitted from the defendant to the mail vendor, including his status as a debtor, the exact balance of the debt, its origin, and other personal information. The plaintiff filed suit, claiming the disclosure of the information to the mail vendor violated the FDCPA’s third-party disclosure provisions, which the district court dismissed for failure to state a claim.

On appeal, the 11th Circuit reviewed whether a violation of § 1692c(b) gives rise to a concrete injury under Article III, and whether the defendant’s communication with the mail vendor was “in connection with the collection of any debt.” In reversing the district court’s ruling, the appellate court determined that communicating debt-related personal information with the third-party mail vendor is a concrete injury under Article III. Even though the plaintiff did not allege a tangible injury, the appellate court held, in a matter of first impression, that under the circumstances, the plaintiff alleged a communication “in connection with the collection of any debt” within the meaning of § 1692c(b). In choosing this interpretation over the defendant’s “‘industry practice argument,’” in which the defendant referred to the widespread use of mail vendors and the relative lack of FDCPA suits brought against debt collectors who use these vendors, the 11th Circuit recognized that its interpretation of the statute may require debt collectors to in-source many of the services previously outsourced to third-parties at a potentially great cost. “We recognize, as well, that those costs may not purchase much in the way of ‘real’ consumer privacy, as we doubt that the [mail vendors] of the world routinely read, care about, or abuse the information that debt collectors transmit to them,” the appellate court wrote, adding, “Even so, our obligation is to interpret the law as written, whether or not we think the resulting consequences are particularly sensible or desirable.”

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