Eleventh Circuit Dismisses Debt Collection Letter Case For Lack Of Standing


A.J. Dhaliwal, September 15, 2022

On September 8, the U.S. Court of Appeals for the Eleventh Circuit issued an order in Hunstein v. Preferred Collection and Management Services, Inc. dismissing the case after determining that plaintiff failed to allege a concrete harm, and thus lacked standing to sue the debt collector for its use of a third-party mail vendor in connection with its debt collection activities.

The Eleventh Circuit previously held that the debt collector in Hunstein violated the FDCPA by using a third-party commercial mail vendor to write, print, and send debt repayment letters on grounds that it constituted a transmittal of a consumer’s private data in connection with a debt under the FDCPA. In overturning this earlier decision, the Eleventh Circuit relied heavily on U.S. Supreme Court’s decision in TransUnion v. Ramirez in its analysis of whether plaintiff sufficiently alleged the type of concrete harm needed to confer Article III standing—specifically, the instruction to analogize to common-law torts. Citing TransUnion, the Hunstein court explains that when considering whether an alleged intangible harm is concrete for purposes of Article III standing, courts will “look to see if it matches up with a harm ‘traditionally recognized as providing a basis for lawsuits in American courts,’” –in other words, “see if a new harm is similar to an old harm.” Applying this standard, the Hunstein court found that the harm alleged by plaintiff there—disclosure to a private party—was not similar to the common-law tort of disclosure to the public, which requires publicity. Without publicity, the court found no invasion of privacy, and thus no real harm.

In the dissenting opinion, Circuit Judge Newsom, joined by four other circuit judges, explained that the court should not look at whether the plaintiff sufficiently pled a common-law tort claim, rather arguing for a “compare the harms” approach—i.e. to compare the harm that the FDCPA was intended to address to the harm that the common law tort was meant to address, and determine whether such harms have a sufficiently “close relationship.”

Putting It Into Practice: This decision is, at least for now, a victory for debt collectors, particularly for actions considered by many as harmless, industry-standard practices of utilizing third-party vendors to send out repayment communications to consumers. Of course, further appeals are possible in this case, and there remains a certain lack of clarity on the scope of the FDCPA and the use of third party vendors.