Currently, consumers are up to their eyeballs in debt and often have multiple creditors knocking on their doors. Given the pressure, consumers must be aware of their rights and responsibilities, and creditors must adhere to the laws that control the credit and debt collection industries. They should also want to recover past dues most efficiently and morally possible.
From a creditor’s point of view, knowing the regulations around debt collection keeps them compliant and on the right side of the law. On the flip side, debtors need to know their rights as consumers to avoid being exploited. Creditors are well within their rights to try to take certain actions to get their money; however, the public is protected by the law from harassment.
One such example that sent shock waves through the debt collection industry was the 11th Circuit held on April 21 that the seemingly benign act of electronically sending information to a letter vendor for inclusion in a standard form dunning letter violated the Fair Debt Collection Practices Act (“FDCPA”).
Know more in detail:
The Hunstein Case and what it means for a debt collection agency:
The Hunstein case decision has been eagerly anticipated by the debt-collecting industry for almost two years.
This landmark case has significant industry ramifications because the majority of financial institutions use external vendors to send letters to their customers. More fuel was added to the fire when numerous copies of the Hunstein case were filed in numerous state and federal courts around the nation.
What precisely is the Hunstein case, and what effects does it have on the debt collection industry?
Let’s dig deeper.
Framework of the Hunstein vs. Preferred Collection & Management Services Case
Richard Hunstein first became involved after receiving a postal payment for his debt.
Hunstein racked up a sizable medical bill, and when he was unable to pay it, the debt was turned over to Preferred Collecting & Management Services, an outside collection firm. This collection business sends reminders to the debtors pleading with them to pay the debt through a third-party postal provider.
As a result, the collection agency sent the vendor information regarding Hunstein’s debt, such as his name, the name of his son, the sum of money he owed, and to who he owed it.
Hunstein’s personal information was entered into a template by the mail provider, who then sent him the collector letter.
Within days of receiving this letter, Hunstein filed a lawsuit, arguing that giving his personal information to the mail vendor was against the Fair Debt Collection Practices Act (FDCPA).
Debt collectors are prohibited from using unfair or dishonest debt collection techniques under the FDCPA. It is against the law for a debt collector to harass, abuse, or disclose information about the creditor.
Hunstein claims that the FDCPA was broken when the collection agency gave his personal information to the mailing vendor, who used it to issue the collection letter.
A lower court decided in the early months of 2021 that the debt-collecting company had not broken the FDCPA. However, a three-judge panel reversed it when it was appealed to the Eleventh Circuit on the grounds that disclosing such information to outside vendors might injure the debtor.
The Eleventh Circuit has officially issued its decision in this case after the defendant requested an en banc rehearing in May 2021.
The Ruling
On September 8, 2022, after deliberating for months, the U.S. District Court for the Western District of North Carolina remanded a case back to state court, concluding that the plaintiff lacked standing to file a lawsuit under the FDCPA because there had been no public revelation of facts.
The defendant claimed that the lawsuit ought to be dismissed because it lacked the legal authority to file an FDCPA claim. A violation of the FDCPA must be directly attributed to another person in order for a claim to be valid under the FDCPA. The court found that there was no invasion of privacy because nobody really viewed or observed the man’s personal information in this case.
As there is no private right of action under the FDCPA, the district court concurred with the defendant and determined that it lacked subject matter jurisdiction over this case.
“The issue with this argument is that the public disclosure requirement, which is a fundamental component of the comparator tort, is missing from his asserted reputational loss. In the words of the Appeals Court, “Without notoriety, a disclosure cannot conceivably create the kind of reputational loss remedied under the common law.
Eight of the Eleventh Circuit’s 12 judges, who made this decision, did so because the plaintiff experienced no actual loss beyond the statute’s breach.
What It Denotes for the Debt Collection Industry?
Even though this case may be over, its effects are widespread.
The decision was made on the grounds that the plaintiff did not experience any harm as a result of receiving the collection letter, nor did he incur any losses. This decision is noteworthy because it establishes how courts will approach third-party vendors’ interactions with debt collectors and creditors under the FDCPA.
The Hunstein Case decision permits debt collectors to continue hiring third party collection agency to help with account recovery so long as they do not break any state or federal rules governing collection letters or phone calls. The decision also clarifies what behaviors fall under the FDCPA’s definition of violations and what do not.
But there are a couple of things to keep in mind:
The court did not explicitly state if disclosing the debtors’ information to outside mailing vendors is against the FDCPA.
Hunstein didn’t actually experience any adverse effects or harm as a result of disclosing personal information to the mailing provider, so the lawsuit was mostly dismissed.
It is vital to keep track of the recent uptick in similar cases in various state and federal courts because they could result in decisions that differ from those in the Hunstein case.
It is safe to argue that in light of the decision, collection agencies can continue to cooperate with mailing providers while keeping an eye on any potential for the FDCPA’s extension to address the consumer concerns raised in the Hunstein case.
How do reputable collectors operate?
While there are many companies that engage in unfair debt-collecting methods, the majority adhere to the laws and approach the process in a professional way.
The address you provided to your creditor will get letters from reputable debt collection companies. Agencies may send letters to your new address in an effort to recover a debt if they can determine that you have relocated. Agencies are required to provide you with precise information regarding your debt, including:
The name of the original creditor.
- How much do you owe (including late fees and other charges)?
- Your right to challenge the in-question debt, given conditions.
- The debt collector must inform you that you have 30 days to submit a written debt dispute.
- They must provide you with the name and address of the original creditor if you ask for it.
- The collection agency may continue to approach you to collect a debt if you don’t contest the debt within 30 days.
Depending on your state of residence and the type of debt you owe, businesses that play by the rules will operate inside the statute of limitations. For example, they won’t call you outside of certain hours, between 8 a.m. and 9 p.m., yet you may receive numerous calls in a single day.
When collection companies conduct themselves ethically, you shouldn’t encounter intimidation or threats. A business is not behaving legally if it warns you that you will be arrested, that the police are on the way, or that someone is pursuing you.
Conclusion
Although collectors are legally entitled to attempt to collect all owed debts, they are restricted in the methods they can employ by the Fair Debt Collection Practices Act. The law passed Congress in 1977 as an amendment to the Consumer Credit Protection Act of 1968.
Working with the right collection agency will help improve your company’s cash flow and set your mind at ease. Take the time to do your research before making a decision about which collection agency will be best for your company and will abide by FDCPA guidelines. Then select a collection service that will be a partner who gets results for your business.
At Vital Solutions, we’ve been helping businesses recover their overdue payments for many years now by all fair and legal means. Our professionalism and experience enable us to recover debts effectively for all sorts of businesses. So, no matter where you are in the USA, if you have an outstanding debt, get in touch with us today.