Upsetting the Apple Cart: Eleventh Circuit Court of Appeals Makes it Illegal for Collectors to Share Information With Vendors

Anytime an appellate decision contains words akin to these you know its a big deal:

“It’s not lost on us that our interpretation of § 1692c(b) runs the risk of upsetting the status quo in the debt-collection industry.”

Uh oh.

In case anyone missed it, we have officially entered a new age of legal decision-making. For a while we lived in the legacy of the old Warren-court paradigm: appellate court judges must apply common sense to the law to keep to assure it makes sense as applied, both at the time of application and in the broader context of the impact any ruling may have.

For better or worse, those days are gone folks.

Cases like Hunstein v Preferred are the new reality. Textualism. Decisions that refuse to take up the policy mantle from Congress and apply the words of a statute with unthinking precision. The Separations of Power doctrine means something. Etc. etc.

And while Hunstein isn’t a TCPA case, its critical to our friends in the collection/servicing space. More than that, its critical for folks hoping to understand how the law works in all contexts–particularly with the TCPA–to understand cases like Hunstein.

In Hunstein–a published opinion by the Eleventh Circuit–the Court blessed the most awkward application of statutory language possible. And yet, its reading of the statute according to basic rules of interpretation is undoubtedly the correct one.

In the old days–like 5 years ago–the Court would have cleaned up Congress’ spilled milk with a line or two about the need to apply common sense to a statute, or interpret it in accordance with its intended purpose. But none of that here. Congress created this mess, and it will be left to Congress to clean it up.

What mess?

FDCPA § 1692c(b).

It provides: “a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.”

Pretty straightforward, no?

Well what about if a collector uses a vendor–say to send out demand letters by mail. The collector obviously will communicate certain information about the debt to the vendor–how else can the demand letter be generated, printed and mailed?

But it is also pretty obvious that the FDCPA never intended to treat the transmission of such data to a vendor to form-fill a template demand letter as a “communication” subject to the Act. Congress was worried about collectors disturbing neighbors, colleagues, co-workers and friends with nonsense shake down demands. That’s bad stuff. And sharing information about a debtor to his social or professional circles is not just unpleasant, it can cause real and lasting harm.

But sharing sterile data points with a mass-print shop that specializes in GLBA compliance and double-thick envelopes?

I mean, come on. Where’s the harm?

Actually, let’s talk about harm for a second. Aside from the “new paradigm” angle here, Hunstein is a critical case for another reason. It frames Article III principles in a useful (although damaging) way. Indeed, I expect Hunstein will become the new primary Eleventh Circuit case onthe subject moving forward.

Hunstein recognizes three forms of Article III concrete harm standing: i) tangible harm; ii) the risk of tangible harm; and iii) statutory violation automatically causes intangible harm.

While Hunstein is correct in applying the standing rules around i) and ii), it swings and misses at iii). Specifically Huntein characterizes the protections of § 1692c(b) as akin to the old “public disclosure of private facts” suits. Cool. In some contexts, therefore, violations of 1692c(b) might cause real harm–like where a collector notifies everyone on a debtor’s Linked in profile that they still owe 80 bucks for unpaid My Pillow purchases.

That might prove embarrassing.

But Article III is all about context. That the violation of a statute might cause intangible harm in some contexts does not answer the CRITICAL question of whether the violation DID cause harm in the specific context of the Plaintiff’s case. And in the context of Hunstein there is absolutely no way the debtor was harmed. The Court even acknowledges as much at the end of the decision:

“We recognize, as well, that those costs may not purchase much in the way of “real” consumer privacy, as we doubt that the Compumails of the world routinely read, care about, or abuse the information that debt collectors transmit to them.”

I mean, right. But that’s why there’s no injury in fact here. See those words “in fact.” They mean, literally, under the “fact[s]” of the case. The facts here caused no injury. So there’s no standing. So why are we here?

But we are here. And we move on.

After finding standing the Court turns to substance. And as I alluded to above the “substantive” review here is really just a review of the statute’s language.

Notably the parties in Hunstein stipulated that the transmission of information to a vendor constitutes a “communication” under the Act (they probably want that one back.) That left only one question for the Court to consider—whether the communication was “in connection with the collection of any debt.”

In addressing the question the Court first rejects the idea that 1692c only applies to “demands for payment.” The statutory exceptions to the rule would be nonsensical if that were true. The Court also rejects Defendant’s preferred approach of applying a holistic multi-factor test to determine whether the communication is in connection with the collection of a debt: the FDCPA has “a discernible ordinary meaning that obviates the need for resort to extratextual ‘factors.’”

In other words– the Hunstein court has no interest in context or common sense. It care only for what the statute says. And that’s fine. Straightforward application of the plain language of a statute does–as the decision points out–lead to more predictable results and to easier compliance efforts in the long run.

But when case law pivots from a “common sense” approach to a “what do the literal words of the statute say” approach overnight someone better sound the alarm.

And I guess that’s my job.


Sorry folks, I got so lost in the esoteric fun of it all that I missed the real world takeaway:

Collectors can no longer share information with vendors, even for lawful purposes like sending demand letters. Yep. Sea change.

Pick your jaws up off the floor and operationalize. The clock is already ticking.

Not sure whether servicers and collectors who aren’t subject to the FDCPA can expect regulatory scrutiny here–but call me and we can talk.



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