Yesterday, as expected, in the case of Hunstein vs. Preferred Collection & Management Services, Inc, 994 F.3d 1341 (11th Cir. 2021), counsel for Preferred filed its Petition for Rehearing en banc. The Petition asserts that the Hunstein panel of judges reached the wrong result in its April 21, 2021 decision and requests that the full panel of 11th Circuit judges rehear the matter.

The Case:

By now, the facts and holding of Hunstein should be pretty familiar. That said, here is the short version:  on April 21, 2021, the 11th Circuit Court of Appeals held that (1) transmitting data to a mail vendor is an unauthorized third-party disclosure under 15 USCA 1692c(b), and (2) a violation of 15 USCA 1692c(b) gives rise to a concrete injury in fact under Article III of the Constitution. 

In reaching its conclusion regarding third-party disclosure, the court reasoned that transmitting such data to a vendor is a communication “in connection with the collection of a debt.”  It’s important to note here that the court did not make a legal finding that the transmission of data was a communication. Instead, Preferred’s counsel acquiesced on that point and made no attempts to argue that the transmission was not a communication. There’s been quite a bit of discussion regarding whether this admission was or was not a critical misstep. Suffice it to say, however, that in the Hunstein opinion, the court saw fit to thank Preffered’s counsel for refraining from arguing this point.   

In reaching its conclusion regarding Article III standing, the court relied heavily on the common law tort of public disclosure of private facts. Specifically, the court appeared to find that sending a data file to a vendor was of the same caliber as a news station disclosing a person’s personally identifiable information and viewing habits to an unrelated third party.  

The Petition for Rehearing:

It is against this backdrop that Preferred’s newly engaged counsel filed the Petition for rehearing en banc. In light of the limited word count of the motion required by the 11th circuit rules, counsel for Preferred highlighted only the most crucial legal errors made by the Hunstein Panel, including the following:

  • The transmission was an automatic, ministerial, electronic transmission of data privately to an agent of a debt collector for the sole purpose of facilitating a communication to the consumer by the debt collector so that a letter could be mailed to Mr. Hunstein. The data was not viewed by human eyes nor published to the public.
  • The decision was contrary to decisions from the U.S. Supreme Court and previous precedent set by the 11th Circuit Court of Appeals.  
  • There is no connection between the electronic transmission of data to a private server maintained by an agent of the debt collector and the tort of public disclosure of private facts since a private server does not pertain to or affect the community or the people as a whole.
  • The electronic transmission of data to a private server of an agent of a debt collector is not a harm congress identified when it enacted the FDCPA.
  • The FDCPA explicitly allows telegrams which are the 1977 equivalent of letter vendors.
  • In a similar case, Flood v. Mercantile Adjustment Bureau, 176 P.3d 769 (Colo. 2008), the Colorado Supreme Court analyzed a state provision equivalent to 15 USCA 1692c(b) and held that use of a letter vendor presents no harm to consumers.
  • The CFPB has found no consumer injury in the use of letter vendors, and the ruling is contrary to Regulation F, which will go into effect on November 30, 2021.

Now that the Petition is filed, there will likely be a flurry of amicus briefs filed by interested parties. We will continue to keep you posted on this case as it unfolds. 

The complete Petition for Rehearing can be found here.

insideARM Perspective:

While there are numerous legal flaws in the Hunstein decision, which the Petition for Rehearing eloquently addressed,  make no mistake about it: if left standing, the Hunstein case will cause immeasurable harm to consumers. Accounts receivable entities use vendors due to their expertise in operational matters which intersect with the collections process. Simply put- vendors have the expertise and the technology to handle certain aspects of the collection process better than debt collectors themselves. Unfortunately, this ruling essentially asks accounts receivable entities to take a step back about forty-five years. Instead of performing critical functions through experts, which act as their agents, Hunstein may require debt collectors to be a master of all trades.

The net result is that consumers will suffer. Correspondence will be disrupted; all those clear, concise, and timely communications the CFPB discussed in Reg F?  No chance. Debt collectors simply don't have the technology or expertise to handle letters like letter vendors. A consumer who would like to pay their bill through a web portal? Try again- that won't be allowed either under Hunstein; after all, the payment portal has to confirm a consumer is who they say they are. Consumers better stock up on checks, stamps, and envelopes and shouldn't even think about receiving a payment confirmation.  And let us not forget about the creditors will sue consumers without ever placing an account with a collection agency- after all – why take the risk?  The list goes on and on, but we'll stop there. 

Hopefully, upon reviewing the points raised in the Petition, and the additional points which will surely be raised in amicus briefs, the court will realize its ruling doesn’t match the law, and its error is going to have a catastrophic effect on the consumers it correctly asserts the FDCPA exists to protect.

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