Farewell, Hunstein—Eleventh Circuit Holds Disclosing Debtor’s Information to Mail Vendor Does Not Establish Concrete Harm

Wayne Streibich, Diana M. Eng, and Andrea M. Roberts ●

Financial institutions, debt collectors, debt collection law firms, and consumer-facing businesses should take note that the Eleventh Circuit Court of Appeals reversed the prior panel’s decision and has ruled that merely providing a consumer’s information to a mail vendor to send a debt collection letter did not violate the FDCPA since it is not a public disclosure and, therefore, the consumer did not suffer concrete harm sufficient to confer Article III standing. The Eleventh Circuit En Banc Panel’s decision should result in the dismissal of other pending FDCPA actions based on this mailing vendor theory and reduce future actions. Further, the decision has broader implications beyond FDCPA cases, as it outlines the Eleventh Circuit’s overall approach in evaluating whether a plaintiff has sufficiently alleged concrete harm. 

In Hunstein v. Preferred Collection and Management Services, Inc., 2022 WL 4102824 (11th Cir. Sept. 8, 2022), the Eleventh Circuit’s En Banc Panel reversed the prior panel’s decision and held “no concrete harm, no standing,” citing the United States Supreme Court’s decision in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021). As such, the Eleventh Circuit held that the United States District Court for the Middle District of Florida (“District Court”) lacked jurisdiction to adjudicate plaintiff’s claim, vacated the District Court’s Order, and remanded with instructions to dismiss the case without prejudice. 

Summary of Facts and Background

After Richard Hunstein (“Plaintiff”) failed to timely pay a medical bill, the hospital transferred the debt to Preferred Collection and Management Services, Inc. (“Defendant”), a debt collection agency. Defendant sent Hunstein a debt collection letter through a commercial mail vendor. In preparation for mailing the letter, Defendant provided the mail vendor with certain information, including Hunstein’s name, his son’s name, and the amount of the debt. 

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Third Circuit Adopts New “Reasonable Reader” Standard and Holds Reporting Consumers’ Pay Status as Past Due with $0 Balance after Transfer Did Not Violate the FCRA

Diana M. Eng and Andrea M. Roberts 

In Bibbs v. TransUnion LLC, 2022 WL 3149216 (3d Cir. Aug. 8, 2022), the Third Circuit Court of Appeals (“Third Circuit”) affirmed the United States District Court for the District of Pennsylvania’s (“District Court”) orders granting TransUnion’s motions for judgment on the pleadings and dismissing the Complaints in three separate actions by Appellants Marissa Bibbs, Michael Parke, and Fatoumata Samoura (collectively, “Appellants”) for violations of the Fair Credit Reporting Act (“FCRA”). Specifically, the Third Circuit held that TransUnion’s credit reporting of Appellants’ accounts, which reflected a Pay Status of more than 120 days past due, a $0 balance, and closing of their accounts due to transfer, when read in their entirety, were accurate and not misleading under the “reasonable reader” standard.

Summary of Facts and Background

Appellants admittedly defaulted under their respective student loans.[1] After the defaults, Navient and Fedloan closed and transferred Appellants’ accounts. As such, Navient and Fedloan reported to the credit reporting agencies, including appellee TransUnion, that the accounts were closed with a balance of zero and all of Appellants’ payment obligations were transferred. Further, the reporting reflected a Pay Status of more than 120 days past due.

After reviewing their credit reports, Appellants, through counsel, sent TransUnion a letter disputing the accuracy of the reports. Specifically, Appellants asserted that the reporting was erroneous because Appellants owed no money to Navient and Fedloan, the prior creditors, and thus, “it is impossible for their current status to be listed as late.”

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Fifth Circuit Holds Mere Statutory Violation of the FDCPA, Future Risk of Harm, Confusion, and Lost Time Are Insufficient to Establish Article III Standing

Wayne Streibich, Diana M. Eng, and Alina Levi

Financial institutions, debt collectors, debt collection law firms, and consumer-facing businesses should take note that the Fifth Circuit Court of Appeals has ruled that merely asserting a statutory violation of the Fair Debt Collection Practices Act (“FDCPA”), confusion, lost time, and/or a future risk of harm are insufficient to establish Article III standing. The Fifth Circuit’s application and clarification of the United States Supreme Court’s 2021 decision in TransUnion LLC v. Ramirez, —U.S.—, 141 S. Ct. 2190, 2200 (2021) (“TransUnion”) should result in the dismissal of other pending actions and prevent future actions based on allegations of a mere statutory violation of the FDCPA, future risk of harm, lost time, and/or confusion resulting from debt collection communications.

In Perez v. McCreary, Veselka, Bragg & Allen, P.C., — F.4th —, No. 21-50958, 2022 WL 3355249, at *1 (5th Cir. Aug. 15, 2022), the Fifth Circuit Court of Appeals (“Fifth Circuit”) vacated a class certification order and remanded the case to be dismissed for lack of jurisdiction, holding that a statutory violation of the FDCPA, alone, is insufficient to confer Article III standing. Further, the Fifth Circuit held that a purported future risk of harm, experiencing confusion, and/or lost time are insufficient to allege the required injury-in-fact for Article III standing to maintain a lawsuit in federal court.

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California’s Highest Court Confirms Lenders Owe No Duty to Borrowers to Process, Review, and Respond to Loan Modification Applications and Nixes Negligence Claim

Wayne Streibich, Diana M. Eng, Cheryl S. Chang, and Jessica A. McElroy

Financial institutions, lenders, and servicers should take note that the California Supreme Court affirmed a Court of Appeal decision confirming there is no duty for a lender to “process, review and respond carefully and completely to” a borrower’s submitted loan modification application. In doing so, California’s highest court resolved a split of authority at the appellate level. However, the Court specifically disclaimed consideration of negligent misrepresentation or promissory estoppel claims, noting that nothing in the opinion “should be understood to categorically preclude those claims in the mortgage modification context.”

In Sheen v. Wells Fargo Bank, N.A.[1] (March 7, 2022), the California Supreme Court affirmed the decision of the Court of Appeal, which upheld the trial court’s decision sustaining defendant lender’s demurrer to plaintiff borrower’s negligence claim in a case involving a junior lien and a lender’s alleged negligence in failing to respond timely to the borrower’s request to modify a second position deed of trust.

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New York Further Extends the COVID-19 Emergency Eviction and Foreclosure Prevention and Small Businesses Acts to January 15, 2022, but Provides a Way to Challenge Hardship Declarations

Wayne StreibichDiana M. Eng, and Chenxi Jiao


Lenders, mortgage servicers, and other financial institutions should take note that the New York State legislature has extended the COVID-19 Emergency Eviction and Foreclosure Prevention Act (“CEEFPA”) and the COVID-19 Emergency Protect Our Small Businesses Act to January 15, 2022. Therefore, the requirements and stays with respect to residential and commercial foreclosures and evictions and credit reporting remain effective through January 22, 2021, to the extent a tenant or mortgagor has submitted a Hardship Declaration. The legislature also amended the statutes, in part, to address the United States Supreme Court’s August decision blocking the enforcement of Part A of the CEEFPA for violating landlords’ due process rights. Per the amendments, landlords and mortgagees can now challenge a self-certified Hardship Declaration in Court.

On September 2, 2021, through a Special Legislative Session, New York State extended the COVID-19 Emergency Eviction and Foreclosure Prevention Act (“CEEFPA”) and the COVID-19 Emergency Protect Our Small Businesses Act (“SBA”) through January 15, 2022. As discussed in our August 17, 2021 Alert, in Chrysafis v. Marks, No. 21A8, — S. Ct. –, 2021 WL 3560766 (Aug. 12, 2021), the United States Supreme Court (“SCOTUS”) granted an injunction blocking the enforcement of CEEFPA and held that Part A of the CEEFPA, a provision allowing tenants to submit an affidavit self-certifying their pandemic-related hardship to prevent eviction, violated the plaintiffs-landlords’ due process rights (“Hardship Declaration”) and was unconstitutional. New York’s new legislation attempts to address this constitutional issue by providing a mechanism for landlords and mortgagees in residential and commercial evictions and foreclosures to challenge the Hardship Declarations by filing a motion.

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U.S. Supreme Court Blocks Enforcement of a Limited Part of New York’s COVID-19 Emergency Eviction and Foreclosure Prevention Act

Wayne Streibich, Diana M. Eng, and Chenxi Jiao


Financial institutions, lenders, and servicers should take note that the United States Supreme Court (“SCOTUS”) granted an injunction filed by plaintiffs-landlords seeking to prevent the enforcement of New York’s COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (“CEEFPA”) because it violates their due process rights. However, SCOTUS limited its ruling to enjoin the enforcement of only Part A of the CEEFPA, which provides that if a tenant self-certifies financial hardship, a landlord generally cannot contest the certification and denies the landlord a hearing. Thus, financial institutions, lenders, and servicers should continue to abide by other prohibitions regarding foreclosures, evictions, and credit reporting in the CEEFPA.

On August 12, 2021, in Chrysafis v. Marks, No. 21A8, — S. Ct. –, 2021 WL 3560766 (Aug. 12, 2021), the United States Supreme Court granted an injunction blocking the enforcement of New York’s COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020—an anti-eviction law originally passed on December 28, 2020, and subsequently extended. SCOTUS found that the provision allowing tenants to submit an affidavit self-certifying their pandemic-related hardship to prevent eviction violated the plaintiffs-landlords’ due process rights (“Hardship Declaration”).

Background

When enacted on December 28, 2020, the CEEFPA stayed all pending residential eviction proceedings and foreclosure actions for 60 days and provided a further stay through May 1, 2021, to those defendants who provided their landlord or lender/servicer, as applicable, with a Hardship Declaration certifying that they have been negatively impacted as a result of the COVID-19 pandemic. On May 4, 2021, the CEEFPA was extended to, among other things, protect tenants who submitted a Hardship Declaration from eviction until August 31, 2021.

On May 6, 2021, a small group of landlords and the Rent Stabilization Association (“Landlords”) filed a lawsuit in the Eastern District of New York challenging the constitutionality of the CEEFPA. The district court dismissed the Landlords’ complaint and the United States Court of Appeals for the Second Circuit denied the Landlords’ request for an injunction pending their appeal. The Landlords then filed for a petition for a writ of certiorari to the Supreme Court and, on July 26, 2021, filed an application for emergency injunctive relief, which was presented to Justice Sotomayor and referred to SCOTUS.

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How SCOTUS Clarified the Spokeo Standard of “Concrete” Harm Necessary to Establish Article III Standing, and What It Means for the Future of Class Actions

Ana Tagvoryan, Deborah A. Skakel, Edward W. Chang, Scott E. Wortman, Jeffrey N. Rosenthal, Chenxi Jiao, and Harrison M. Brown

On June 25, 2021, the United States Supreme Court issued its decision in TransUnion LLC v. Ramirez, No. 20-297, 2021 WL 2599472 (U.S. June 25, 2021) (“TransUnion”), providing much needed clarity regarding the type of “concrete” harm necessary to establish a plaintiff’s standing under Article III of the United States Constitution.

In a 5-4 decision authored by Justice Kavanaugh, the Court expounded on its ruling in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016), using several examples to illustrate how to measure the harm plaintiffs allege from a statutory violation. As Justice Kavanaugh succinctly stated: “No concrete harm, no standing.”

In TransUnion, the lower court certified a class of 8,124 absent class members who purportedly suffered injury under the Fair Credit Reporting Act (“FCRA”) because TransUnion had placed an alert on their credit report indicating that the consumer’s name was a “potential match” to a name on the list maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) of terrorists, drug traffickers, and other serious criminals.

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The Hunstein Effect—Examining the Eleventh Circuit’s Ruling and What’s Next for Debt Collectors and Their Third-Party Service Providers

Wayne Streibich, Nicole R. Topper, Scott E. Wortman, and Anthony Richard Yanez

The U.S. Court of Appeals for the Eleventh Circuit has delivered a novel and highly consequential interpretation of the Fair Debt Collection Practices Act that is potentially transformative for debt collectors and their third-party service providers.

On April 21, 2021, in Hunstein v. Preferred Collection and Management Services, Inc., — F.3d — (2021), the U.S. Court of Appeals for the Eleventh Circuit issued a decision on a case of first impression, finding that a debt collector’s transmittal of a consumer’s personal information to its letter vendor constituted a prohibited third-party communication “in connection with the collection of any debt” within the meaning of section 1692c(b) of the Fair Debt Collection Practices Act (“FDCPA”). As discussed below, this ruling has broad ranging ramifications for the accounts receivable management industry and will likely foster a new wave of litigation under the FDCPA.

By way of background, this lawsuit originated from unpaid bills for medical treatment at a hospital. The hospital assigned the unpaid bills to a debt collector that had contracted with a third-party vendor for printing and mailing its collection letters. The collector electronically transmitted to its vendor certain information about the plaintiff/debtor such as: (1) his status as a debtor, (2) the exact balance of his debt, (3) the entity to which he owed the debt, (4) that the debt concerned his son’s medical treatment, and (5) his son’s name. The vendor then used that information to generate and send a dunning letter to the debtor. The debtor received the dunning letter and then filed a lawsuit in the Middle District of Florida alleging violations of both the FDCPA and the Florida Consumer Collection Practices Act. The district court dismissed the lawsuit for failure to state a claim by concluding that the debtor had not sufficiently alleged that the collector’s transmittal of information to the letter vendor was a communication “in connection with the collection of a debt.” The debtor then appealed to the Eleventh Circuit.

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U.S. Supreme Court Holds “Autodialer” Definition under the TCPA Is Limited to Equipment Using a Random or Sequential Number Generator

Wayne StreibichDiana M. Eng, and Andrea M. Roberts

Financial institutions, debt collectors, and consumer-facing businesses should take note that the United States Supreme Court has ruled that the definition of an “autodialer” under the Telephone Consumer Protection Act, as written, requires that the device must use a random or sequential number generator. This narrow interpretation should shield companies from liability in current or future actions, where the consumers’ telephone numbers are known and not random or sequentially generated.

In Facebook, Inc. v. Duguid, 592 U.S. ___ (2021), the United States Supreme Court (“SCOTUS”) narrowly interpreted the definition of “autodialer” under the Telephone Consumer Protection Act (“TCPA”), holding the definition excludes equipment that does not use a random or sequential number generator. SCOTUS specifically held that an “automatic telephone dialing system” is limited to equipment that either stores a telephone number using a random or sequential number generator, or produces a telephone number using a random or sequential number generator.

Summary of Facts and Background

Plaintiff Noah Duguid (“Plaintiff”) began receiving several login-notification text messages from defendant Facebook, Inc. (“Facebook”), alerting him that someone had attempted access to the Facebook account associated with his phone number from an unknown browser. Plaintiff never had a Facebook account and had not given Facebook his phone number. As such, Plaintiff commenced a putative class action in the District Court for the Northern District of California (“District Court”) against Facebook, alleging it violated the TCPA by maintaining a database that stored phone numbers and programmed its equipment to send automated text messages to the stored phone numbers each time the person’s account was accessed by an unrecognized device or browser.

Facebook moved to dismiss, arguing that it did not violate the TCPA because Facebook did not use an automatic dialer, as its text messages were not sent to phone numbers that were randomly or sequentially generated. Rather, Facebook sent targeted, individualized texts to phone numbers linked to specific accounts. The District Court agreed with Facebook and dismissed Plaintiff’s complaint with prejudice.

Plaintiff appealed, and the United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”) reversed the District Court’s order. The Ninth Circuit held that an autodialer “need not be able to use a random or sequential generator to store numbers; it need only have the capacity to ‘store numbers to be called’ and ‘to dial such numbers automatically.’” SCOTUS granted certiorari to resolve a circuit split among the Courts of Appeals regarding whether the definition of an “automatic telephone dialing system” includes equipment that can “store” and dial phone numbers, even if such equipment does not “us[e] a random or sequential number generator.”

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New York’s Highest Court Makes Key Rulings in Favor of Lenders Clarifying What Accelerates and De-Accelerates a Mortgage Debt for Statute of Limitations Purposes

Wayne Streibich, Diana M. Eng, and Chenxi Jiao

On February 18, 2021, the New York Court of Appeals issued a decision reversing the Appellate Division, First Department (“First Department”) and Appellate Division, Second Department’s (“Second Department”) decisions in Freedom Mortgage Corp. v. EngelDitech Financial, LLC v. NaiduVargas v. Deutsche Bank National Trust Company, and Wells Fargo Bank, N.A. v. Ferrato. Specifically, the Court of Appeals held, inter alia, that:

  1. a default letter stating that the lender “will” accelerate the debt referred to a future event and therefore did not accelerate the debt;
  2. the voluntary discontinuance of a foreclosure action (whether by motion or stipulation) within six years of acceleration, alone, revokes acceleration as a matter of law, unless the noteholder expressly states otherwise;
  3. the reason for a noteholder’s revocation is irrelevant, thereby expressly rejecting the concept that a noteholder’s revocation of acceleration cannot be “pretextual” to merely avoid the expiration of the statute of limitations; and
  4. a verified foreclosure complaint that accelerates the mortgage debt must clearly and accurately refer to the loan documents and debt at issue.

The Court of Appeals’ decision resolves a split between the First and Second Departments regarding whether a default letter clearly and unequivocally affirmatively accelerates a mortgage debt and provides much needed clarity on what conduct sufficiently accelerates a mortgage debt and revokes acceleration.

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