11th Circuit Ruling on Creditors’ Use of Mail Vendors Leads to Jump in FDCPA Lawsuits

We wrote in May about a new 11th Circuit opinion that may affect creditors who send information to outside vendors to generate and mail collection letters. The 11th Circuit acknowledged that its opinion might have widespread implications across the debt collection landscape. But the court concluded that its “obligation is to interpret the law as written, whether or not we think the resulting consequences are particularly sensible or desirable.” As it turns out, the court’s “prediction” is proving true – the decision is causing “shock waves” across the debt collection industry.     

What does the ruling mean for creditors?

The case arose under the Fair Debt Collection Practices Act (FDCPA). It provides in Section 1692c(b) that “a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.” The court held that the creditor’s transmittal of data to its vendor to generate and mail a demand letter was a communication “in connection with the collection of any debt” within the meaning of Section 1692c(b). It sent the case back to the trial court for further proceedings. After this decision, creditors who have sent or are sending information to vendors to generate and mail collection letters face increased risk of being sued by their debtors under the FDCPA.

In our last article, we predicted that the court’s ruling would result in numerous lawsuits being filed against creditors, including class action litigation. As anticipated, hundreds of “copycat” cases have been filed around the country during just the two months since the 11th Circuit’s opinion was issued. And it is unlikely that this influx of FDCPA litigation against creditors will let up any time soon.

Could the court change its ruling?

However, it remains to be seen whether the 11th Circuit decision will remain in place or even be followed by other circuits. The defendant debt collector in that case recently filed a petition asking the full court to reconsider the opinion. Several industry trade groups also filed briefs advocating for rehearing and reversal of the decision. So, although it might be unlikely, it is possible that the 11th Circuit will modify or even reverse its decision if it rehears the case. If the court does not reverse field, it appears likely that the defendant will seek Supreme Court review of the decision. There also have been calls for regulatory intervention to aid creditors struggling with debt collection efforts after the new decision. In short, the dust is far from settled on this issue.  

How can creditors prepare for the ruling’s possible effects?

In the meantime, creditors should proceed cautiously with any information provided to outside vendors, fully evaluate how they are handling communications with their debtors, including whether collection letters should be mailed “in-house” at least until the law becomes more settled on this issue, and prepare for possible litigation if they use or have used third-party vendors to generate and mail collection letters.

Stay tuned for further developments. Please contact Mike Hooker, Guy McConnell, or any member of Phelps’ Litigation team if you have questions or need compliance advice and guidance.