There is a seemingly never-ending trail of lawsuits in the credit and collection industry. Deciding to fight a lawsuit rather than just settle can be a difficult decision for any collection agency. The Preferred Group of Tampa just won a motion for summary judgment after it was sued for allegedly violating the third-party disclosure provision of the Fair Debt Collection Practices Act because it outsourced the printing and mailing of its collection notices to a third-party vendor, something that just about every collection agency does.
Preferred fought the lawsuit, and won. Matt Kiefer, the agency’s Chief Officer of Information, Compliance & Development, who also happens to be president of the Florida Collectors Association, graciously shared his thoughts about the case and the importance of the industry working together to try and stem the tide of frivolous lawsuits.
So often I comment on cases of other agencies with my perspective, it is unique and refreshing to be able to comment on a case involving my own agency with a win on MSJ to boot. In Hunstein v. Preferred Collection & Mgmt. Servs., No. 8:19-cv-983 (M.D. Fla. Oct. 29, 2019) brought in the Middle District of Florida, we fought a claim of an alleged FDCPA violation for unauthorized third-party disclosure regarding a debt (Title 15 U.S.C. §1692) as well as the Florida Consumer Collection Practices Act (FCCPA- § 559.551, et seq., Florida Statutes). The third party you ask? No, it wasn’t a boyfriend, a girlfriend, a family member, it was our letter vendor that processes our letters in bulk and sends out our notices. Find any case law to shoot this down? Search and search and you won’t find much if anything for this specifically.
Was this communication in connection with the collection of a debt? That was the standard we needed to beat to win on MSJ. There would have to be an implied or express demand for payment from our letter vendor as previously ruled in the 11th Circuit Court of Appeals. Our attorney Robert Vigh, (Solomon, Vigh, P.A.) out of Tampa, Fla., did an excellent job of researching and compiling the relevant supporting cases and rules to win on MSJ. Ultimately, the court agreed that Preferred’s communication with our mail vendor did not qualify as a communication in connection with the collection of a debt. Rob cited numerous cases regarding the standard regarding “communications in connection with collection of a debt.”
“In the instant case, it appears that Hunstein conflates two communications: (1) Preferred’s transmission of information to CompuMail for the purpose of generating a letter to Hunstein;4 and (2) the actual debt collection letter, that was allegedly transmitted from CompuMail to Hunstein. After careful review, the Court finds that Hunstein does not and cannot allege that Preferred attempted to collect Hunstein’s debt from CompuMail. Rather, it is the second communication — the letter that Hunstein himself received — that had the objective of motivating someone to pay the debt. The fact that the debt collection letter that CompuMail generated and sent would be considered a “communication in connection with the collection of a debt” does not make the transfer of information to CompuMail a communication in connection with the collection of a debt. It simply makes it a communication with a third party. Consequently, the Court finds that the letter sent from Preferred to the mail house does not violate §1692c(b).”
As a compliance officer of many years with experience in identifying best practices to TRY and stay ahead of the game, you often find yourself in a minefield. You have resources to help identify the danger as you are running your operation, but you often have to be able to change on a dime because of the ever-changing rulings that come out that can vary from jurisdictions or even within the same jurisdiction. But even winning on a MSJ against a frivolous claim such as this, costs an agency time and money to defend, and the plaintiffs really have no skin in the game, meaning they have nothing to lose because it is hard to prove the claim was brought in bad faith. In fact, the CFPB even mentioned the use of using mail houses in debt collection and had nothing to say against the practice. This is, after all, 2019, not 1978. This is why it is important for management to fight and not settle when able, because for every agency like ours that is willing to fight, there are others out there that won’t or can’t fight due to limited resources. But in settling, you set yourself up to be a target and the Plaintiff attorneys know your breaking point and will always go after the low hanging fruit.
So what can an agency owner/operator do? For one, (shameless plug for ACA International), stay active in your associations — whether it is ACA International, RMAI, or others and don’t forget your state associations like the Florida Collectors Association. Florida is a hotbed for litigation and one only need to take a drive around town and look at billboards or watch commercials on TV to see this. Every day, consumers are encouraged to reach out to the big law firms (and the smaller ones getting into this niche) because of the promise of easy money. There are even websites and YouTube videos to teach them how (for a fee).
Litigation seems to be on the rise and it is only going to get worse with up and coming strict state privacy laws across the nation, “creative suits” like this one, and the ability to piggyback off of an alleged federal violation with a similar mirrored violation of a state consumer law. Stay ahead of the game and be aware, because they will soon come for you too. Sleep well my compliance colleagues. Sleep well.