Hunstein Case — It’s Not Over Yet

The Hunstein v. Preferred Collection Management Services Inc. case has held interest of the debt collection industry since the first opinion was issued on April 21, 2021. On September 8, 2022, the 11^th Circuit Court of Appeals issued an en banc decision that vacated the previous decisions, causing an audible sigh of relief, but it may not be the last we hear about the Hunstein case and others like it.

The Hunstein Case

Hunstein v. Preferred involves a consumer who incurred a debt to a hospital for medical bills. The hospital assigned the debt to Preferred, who then hired Compumail, a third-party mail vendor, to create, print and mail a “dunning” letter (a collection letter that requests payment) to the consumer. This was done by electronically transmitting certain information about the debt, including the consumer’s name, outstanding balance, the origin of the debt (his son’s medical treatment) and his son’s name.

The consumer filed a lawsuit against Preferred alleging, among other matters, that sending his personal information to the mail vendor constituted a violation of §1692c(b) of the FDCPA (Fair Debt Collection Practices Act), which states:

Except as provided in section 1692b of this title [re: requesting location information], without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, 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 consumer essentially claimed that, with limited exception,  a debt collector may only communicate with the consumer and select others “in connection with the collection of any debt.”

This action was dismissed by the district court for failure to state a claim, finding that the consumer failed to sufficiently allege that the transmittal of information to the mail vendor violated §1692c(b) of the FDCPA because it did not qualify as a communication “in connection with the collection of any debt.”

11^th Circuit Court of Appeals

The appeal opinion issued in April 2021 reversed that decision, putting into question the legality of the common practice in collections of using a third-party vendor to send collection letters to consumers. The practice was so common and universally accepted in the collections industry that even the Consumer Financial Protection Bureau (CFPB) acknowledged it as permissible in the debt collection rule finalized in 2021.

This put the collections industry in a quandary as agencies scrambled to find alternative methods they could use if this opinion remained intact.

In September 2022, the 11^th Circuit issued an en banc decision vacating the previous decisions. They concluded there was no concrete harm, and thus no Article III standing.

Hunstein To Be Continued

While the collections industry views this opinion as a positive step, it is still undecided at this point. Not only can the consumer appeal to a higher court, but since the Hunstein case never went to trial, it does not set precedence. Additionally, there are several cases being tried on the state level that could also impact the Though it is business as usual for the collections industry, this will remain a potential issue until there is legislation or a finalized court case.

Americollect will continue to follow the Hunstein case and any others that could impact how we work with our clients. If you have questions, please contact us.