11th Circuit rules that sharing of debtor’s information with third party vendor is actionable under the FDCPA

The appeal in Hunstein v. Preferred Collection and Management Services, Inc., No. 19-14434 (11th Cir. Apr. 21, 2021) arose from the dismissal of a claim that a debt collector violated section 1692c(b) of the FDCPA which prohibits a debt collector from communicating consumers’ personal information to third parties “in connection with the collection of any debt.” The circuit court held that the debt collector’s electronic transmission of data concerning the debtor’s debt—including his name, his outstanding balance, and other information—to a third-party vendor was not “in connection with the collection of any debt.” The appellate court reversed but it first independently examined whether the sharing of a debtor’s information with a third-party vendor, without more, gave the debtor Article III standing.

Whether a plaintiff has an injury in fact for Article III purposes, he or she must have suffered “an invasion of a legally protected interest” that is both “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” The concreteness element can be met where the plaintiff alleges a tangible harm, such as physical injury, financial loss, or emotional distress, or a “risk of real harm.” In the absence of a tangible injury or a risk of real harm, the plaintiff can also identify a statutory violation that gives rise to an intangible-but-nonetheless-concrete injury. In assessing this type of injury, the Supreme Court in Spokeo, Inc. v. Robins, ––– U.S. ––––, 136 S. Ct. 1540 (2016) said courts should consider the “history and the judgment of Congress.”

The debtor did not allege a tangible harm or demonstrate a risk of real harm. But as to whether a statutory violation conferred standing, the 11th Circuit found in the history of the FDCPA that one of its express purposes was to protect consumers from “invasions of individual privacy.” And the prohibition on sharing a debtor’s personal information under section 1692c(b) bears a close relationship to that common law tort. The Court found that Congress’s identification of the “invasion[ ] of individual privacy” as one of the harms against which the statute is directed also reflected “the judgment of Congress”. Thus, because section 1692c(b) bears a close relationship to a harm that courts have long recognized as cognizable and Congress’s judgment indicates that violations of this section constitute a concrete injury, the debtor had standing to sue.

Turing to the merits, in construing the plain meaning of the phrase “in connection with” and its cognate word, “connection”, the Court had little difficulty concluding that the transmittal of the debtor’s information at least “concerned,” was “with reference to,” and bore a “relationship [or] association” to its collection of the debt. The Court faulted the trial court for relying on case law interpreting section 1692e of the FDCPA that the phrase “in connection with the collection of any debt” necessarily entails a demand for payment. First, the demand-for-payment interpretation would render superfluous the exceptions spelled out in §§ 1692c(b) and 1692b. Communications to four of the six parties excepted from the communication prohibition would never include a demand for payment. Communications excluded under § 1692b, pertaining to acquiring information on the debtor’s location, would presumably never include a demand for payment either. Section1692e’s language and operation are different from § 1692c(b)’s. As a linguistic matter, § 1692e contains none of the specific exceptions that § 1692c(b) does. As an operational matter, § 1692e—which prohibits “false, deceptive, or misleading representation or means in connection with the collection of any debt”—covers the sorts of claims that are brought by recipients of debt collectors’ communications—i.e., debtors. As its title indicates, § 1692c(b), targets debt collectors, not debtors. “It makes little sense for a debt collector to threaten consequences should the debtor fail to pay in a communication that is not sent to the debtor himself.”

The Court recognized, in closing, that its interpretation runs the risk of upsetting the status quo in the debt-collection industry in that it may well require debt collectors (at least in the short term) to in-source many of the services that they had previously outsourced, potentially at great cost. But its obligation is to interpret the law as written, regardless of the consequences.

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