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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