Creditors Beware – Sending Data to Mail Vendors Can Be an Unauthorized Third-Party Disclosure Under FDCPA
The 11th Circuit recently issued an opinion that should get the attention of any creditor using an outside vendor to send demand letters to consumers. At least in the 11th Circuit, creditors now face increased risk of being sued under the Fair Debt Collection Practices Act (FDCPA) if they send information to vendors for the purpose of generating and mailing collection letters.
Section 1692c(b) of the FDCPA provides 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.” In this case, the plaintiff alleged that a creditor violated this section by sending a data file with information about the plaintiff to a mail house for preparation and mailing of a collection letter. The information included his name, his outstanding balance, the fact that the debt resulted from his son’s medical treatment, and his son’s name. Disagreeing with the District Court, the 11th Circuit held that the creditor’s action constituted a communication “in connection with the collection of any debt” within the meaning of Section 1692c(b). The 11th Circuit sent the case back to the trial court for further proceedings.
In reaching its decision, the 11th Circuit looked at the statute’s limits on communications with third parties about a debt. It found that the creditor’s communication to its mail house at the very least concerned, was with reference to, and bore a relationship to or association with its collection of a consumer debt. Further, the court rejected the creditor’s argument that its transmittal of data to the vendor was not an unauthorized disclosure because it did not include a demand for payment. Significantly, the 11th Circuit acknowledged that its decision might have widespread implications across the debt collection landscape. However, 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.”
Whether other circuits will follow the 11th Circuit’s lead remains to be seen. But at a minimum, we expect that plaintiffs’ lawyers soon will be filing numerous lawsuits, including class action litigation, against creditors who use or have used outside vendors to send collection letters in an effort to capitalize on this consumer-friendly decision. Creditors should proceed cautiously and consider whether to handle mailing of collection letters “in-house” until the dust settles.
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.
