Greater than a yr in the past on April 21, 2021, the eleventh Circuit Courtroom of Appeals issued an opinion in Hunstein v. Most popular Assortment and Administration Providers Inc. that rocked the world of the debt assortment {industry}, and the bigger monetary providers {industry} generally. That call put into query the legality of the widespread assortment apply of utilizing a third-party vendor to ship assortment letters to shoppers. The apply was so widespread and universally accepted that even the Shopper Monetary Safety Bureau acknowledged it as permissible within the debt assortment rule it finalized in 2021.

But, the Hunstein court docket held that the mere transmission of data to a letter vendor to facilitate the automated processing and mailing of a letter to a shopper was a “communication” with the letter vendor below the Truthful Debt Assortment Practices Act, although not a single particular person on the letter vendor ever noticed the data that had been processed by means of automation. Particularly, within the unique opinion, the court docket held that: (1) a shopper had standing to carry a declare below the Truthful Debt Assortment Practices Act (FDCPA) as a result of he alleged an invasion of privateness primarily based on the unfold of his debt-related data; and (2) a debt collector’s outsourcing of its letter course of to a third-party mail vendor violates the FDCPA as a result of sending the information to create and mail letters to shoppers violates the prohibition on third-party disclosure set forth in Part 1692c(b) of the FDCPA.

When this startling resolution got here out, the complete monetary providers {industry} took discover as a result of practically all monetary providers suppliers and monetary establishments used letter distributors to offer shoppers with wanted data. Including to the misery, lots of of copycat circumstances have been filed in each state and federal courts across the nation.

Because of this, varied teams within the debt assortment {industry} weighed in because the courts started to reevaluate the problematic resolution, together with ACA Worldwide, which filed an amicus transient. A number of different monetary providers commerce associations teams, together with the Credit score Union Nationwide Affiliation, Mortgage Bankers Affiliation, American Bankers Affiliation, American Monetary Providers Affiliation, Shopper Bankers Affiliation and the Housing and Coverage Council additionally weighed in as amici. Within the amici transient they said, “Appellant Richard Hunstein’s place on this case threatens the functioning of debt collectors, mortgage servicers, and the broader monetary providers {industry}, in addition to the various different sectors of the financial system that rely on entry to monetary providers.”

In late October 2021, the monetary providers {industry} confronted one other blow when the unique resolution was reaffirmed by a panel of three judges, holding that: (1) the violation of Part 1692c(b) alleged within the case provides rise to a concrete harm in reality below Article III; and (2) The debt collector’s transmittal of the buyer’s private data to its dunning letter vendor constituted a communication “in reference to the gathering of any debt” throughout the that means of Part 1692c(b). Most popular Assortment then sought an en banc evaluation.

After months of ready for added readability, final week, on Sept. 8, 2022, the eleventh Circuit issued an en banc resolution vacating the earlier selections, concluding there was no concrete hurt and thus no Article III standing. Whereas the court docket didn’t handle the bigger questions on the deserves of congressional intent, the court docket did embody some useful dicta. The court docket said in that regard,

“… However even assuming—which we don’t—that Congress was trying to focus on the workaday vendor relationships alleged right here, congressional intent doesn’t routinely remodel each controversial invasion of privateness into an actionable, concrete harm. As TransUnion defined, courts haven’t any “freewheeling energy to carry defendants accountable for authorized infractions.” As a result of    Hunstein has alleged solely a authorized infraction—a “naked procedural violation”—and never a concrete hurt, we lack jurisdiction to contemplate his declare.”

This resolution is important for the monetary providers {industry} as a result of copycat circumstances that have been filed in federal courts and stayed pending this resolution are actually in jeopardy. Nonetheless, it’s anticipated that comparable circumstances to Hunstein will proceed in state courts and lots of copycat circumstances are nonetheless working their method by means of these courts.

What does this imply for monetary service suppliers utilizing letter distributors?

In mild of the en banc panel’s resolution, it’s arguably safer to proceed to make use of letter distributors than it was after the unique resolution. The en banc panel’s skepticism about whether or not there may be really any hurt on this apply, coupled with useful dicta, and the CFPB’s seeming blessing to make use of third-party distributors, make arguments towards using a letter vendor associated to privateness seem to be a stretch. Nonetheless, now that this may of worms has been opened, monetary providers suppliers ought to proceed to watch this litigation in state courts for every other twists and turns which will make using letter distributors more durable.

It additionally could also be related to watch any potential efforts by advocacy teams to increase the scope or studying of the FDCPA by means of state or federal laws mirroring the considerations of Hunstein, significantly for the reason that Nationwide Shopper Legislation Middle and others filed an amicus brief outlining considerations about privateness points.

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING THE IMPLICATIONS OF THE RECENT HUNSTEIN DECISION. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.