The decision of the Court of Appeal potentially calls into question the practices of debt collection | McGlinchey Stafford

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The Eleventh Circuit issued a notice on April 21, 2021, relating to the Fair Debt Collection Practices Act (FDCPA), which is must-read for anyone dealing with loan servicing or debt collection. The Eleventh Circuit explains that “[i]it is not lost on us that our interpretation of [the FDCPA] risks upsetting the status quo in the collections industry. . . . Our reading of [the FDCPA] may well require debt collectors (at least in the short term) to internalize many services that they had previously outsourced, potentially at a high cost. “At least one class action lawsuit has already been filed in response to this notice, and we expect many more copycat lawsuits to follow. Similar lawsuits are also expected to be brought against creditors in several states where there is similar law that follows the FDCPA.

In Hunstein v. Preferred Collection and Management Services, Inc., the Eleventh Circuit held that the transmission by a collector of a debtor’s personal information to its printer for the purpose of preparing a letter of recovery constitutes communication “in connection with collection of any debt ”within the meaning of 15 USC § 1692c (b) of the FDCPA. Section 1692c (b) generally prohibits communication with third parties “in connection with the collection of any debt” without the consumer’s prior consent, except in limited circumstances.

In reaching this conclusion, the Eleventh Circuit interpreted “as part of the recovery of any debtIn an extremely broad way, rejecting the need for communication to the third party to constitute itself the collection of debts. The Court treated the expression as being “invariably a vague and loose conjunctive”, and therefore simply “relating to”, to be “in reference to” or “to have a relation or association” with debt collection is sufficient.

Significantly, this is not the only time this phrase appears in the FDCPA. There is a long line of cases interpreting the phrase “as part of the recovery of any debt”Closely in the context of §1692e claims relating to false, misleading or deceptive representations, generally requiring that the communication include a demand for payment. However, the Eleventh Circuit expressly rejected the application of this narrow interpretation to the claims of § 1692c (b), taking the unusual position that the sentence need not be interpreted consistently throughout the FDCPA. Fortunately, by expressly stating that different interpretations are appropriate and focusing on the specific context of §1692c (b), the Eleventh Circuit likely created a significant obstacle to any attempt to extend this ruling to other provisions of the FDCPA. , including those involving direct communication. to the debtor.

The extremely broad interpretation of this expression by the Court creates an immediate risk for companies that transfer consumer data to third parties, even in the performance of ministerial tasks such as creating and sending follow-up letters and phone calls.

The Court explains that the consequence of the detention can oblige the companies to obtain supplies “”many services“which would generally be outsourced, signaling that there is a wide range of third-party services that could be swept away by the ruling. In addition to the copy lawsuits related to the third-party submission, we expect the bar The complainant is also targeting other types of vendor services, testing the waters as to the extent to which they can stretch the Eleventh Circuit’s interpretation of what is “as part of the recovery of any debt. “

We are closely monitoring developments related to this issue, and early signs indicate that the collection agency will seek to in bench repetition.


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