Hunstein II: 11th Circuit Doubles Down On Dubious Conclusion That Mail Vendor Usage Violates FDCPA

• Published date: 03 November 2021
• Subject Matter: Finance and Banking, Consumer Protection, Litigation, Mediation & Arbitration, Privacy, Debt Capital Markets, Financial Services, Data Protection, Consumer Law, Privacy Protection, Trials & Appeals & Compensation
• Law Firm: Manatt, Phelps & Phillips LLP
• Author: Mr Richard E. Gottlieb, Brett J. Natarelli and Charles E. Washburn, Jr.

In a surprise to many, an arguably rogue panel of the U.S. Court of Appeals for the Eleventh Circuit has now reaffirmed its earlier decision from Hunstein v. Preferred Collection, 994 F.3d 1341, holding that (1) a plaintiff has Article III standing to sue a debt collector for violating federal debt collection law by merely disclosing personal information to the mail vendor employed to send debt collection communications, and (2) on the merits, the plaintiff sufficiently pleaded a claim for unauthorized third-party disclosure because mail vendors are third 'persons' who were sent communications concerning a consumer's debt. Given the prior ruling, then, why are we surprised? We explain below.

What happened

The short answer: TransUnion v. Ramirez happened. But first some background.

In Hunstein, a Florida-based plaintiff, Richard Hunstein, failed to pay a medical debt, and the hospital referred the matter to Preferred, a debt collector, which employed a third-party mail vendor, CompuMail, to mail a collection letter to Hunstein. Among other things, that letter identified Hunstein, his status as a debtor, the amount owed, that it concerned medical treatment for his son, and his son's name.

In one of the first suits of its kind, Hunstein sued under both the FDCPA and the Florida equivalent, claiming Preferred wrongfully disclosed his personal information, without permission, to CompuMail. The basis for his claim? Hunstein alleged that sending his information to a mail vendor per se violated Section 1692c(b) of the FDCPA, which generally bars debt collectors from communicating consumers' personal information to third parties 'in connection with the collection of any debt.' The district court dismissed but a unanimous three-judge panel of the Eleventh Circuit, on appeal, reversed, in April 2021.

The debt collection industry was understandably outraged. How could the mere use of a pass-through vendor invade anyone's privacy? What was the likelihood anyone at the vendor even read the content, or further disseminated it? No appellate court had ever concluded that the mere engagement of mail vendors to send dunning letters was a violation of the FDCPA. That is, until Hunstein.

While defendants were busy challenging the ruling, the U.S. Supreme Court issued its decision in TransUnion v. Ramirez, which together with the earlier Spokeo v. Robins case, largely rejected the notion that plaintiffs with mere statutory violation claims had standing to sue defendants. As...