Tenth Circuit dismisses FDCPA claim for lack of standing where third party mail vendor sent collection letters | Chicago Popular


The United States Court of Appeals for the Tenth Circuit recently joined the Eleventh Circuit (and a growing majority of courts) in rejecting the “Hunstein theory” of liability under the Fair Debt Collection Practices Act (FDCPA). In the Shields v Professional Bureau of Collections of Maryland, Inc.the Tenth Circuit affirmed a lower court’s dismissal of the FDCPA requests for lack of standing, confirming that a debt collector’s use of an outside mail vendor does not constitute actual, actionable harm.

The case involved attempts to collect a consumer’s student loan debt. In 2019, the debt collector sent the consumer three letters to collect a balance that has increased over time. None of the letters disclosed that the balance would increase due to accruing interest, commissions and other charges (i.e., the Miller/Avila safe haven language explaining the fact that a debt can increase). All three letters were sent by a third party mail seller.

The consumer has filed four complaints against the debt collector for various violations of the FDCPA, including (1) a violation of 15 USC § 1692e(2)(A) for misrepresenting the character, amount, or legal status of the plaintiff debt; (2) a violation of 15 USC § 1692e(10) by using any false, deceptive, or misleading representation or means in connection with debt collection; (3) a violation of 15 USC § 1692g(a)(1) by failing to meaningfully convey to the plaintiff the debt amount in its initial notice or within five days thereafter; and (4) a violation of 15 USC § 1692c(b) by communicating with a third party about the plaintiff’s debt without consent or authorization.

The debt collector argued that the consumer had no standing to make any of these claims. Dismissing the first three applications, the District Court held that the general consumer confusion resulting from the discrepancy in the letters about how much to owe, and whether it included interest and expenses, did not lead to tangible damage sufficient to confer entitlement. The court also rejected the fourth claim, rejecting the consumer’s argument that the damage she suffered amounted to a tort of public disclosure of private facts just because the debt collector passed on the consumer’s account data to your third-party mail vendor to generate and send letters directly to you.

On appeal, the consumer deduced that she was entitled to act as she suffered both concrete, material and immaterial damage. The Tenth Circuit acknowledged that outside mail sellers are not one of the enumerated exceptions to the FDCPA’s prohibition against disclosing a consumer’s debt to a third party without consent (15 USC § 1692(b)), but ultimately found that the transmission of data to the mail seller was not the kind of “advertising” sufficient to constitute damage. In doing so, he relied heavily on the recent holding of the Eleventh Circuit Hunstein v. Preferred Collection and Management Services. In the Hunsteinthe at the bank the court reversed the earlier conclusions on legitimacy and ruled that there was no harm without publicity and that there was no invasion of privacy where (as in Shields), the debt disclosure did not extend beyond the third-party mail seller. We discussed earlier Hunstein as he worked his way through the courts in several blog posts (here, here, hereAnd here) And in one episode of the Consumer Finance Monitor podcast.

As to plaintiff’s claims based on the substance of the three letters, while noting that the FDCPA prohibits making false statements about the character, amount, or legal status of any debt (15 USC § 1692e(2)(A)), or use of misrepresentation or deceptive means to collect the debt (15 USC § 1692e(10)), the court found that the consumer only claimed that the letters were generally prejudicial and confusing, not that they caused her to do something by relying on them. The court found that this confusion and misunderstanding was not sufficient to confer locus standi. (It is worth noting that the plaintiff had attached a statement to her appeal to the debt collector’s filing claim alleging prejudicial reliance stemming from the letters, but the district court declined to consider the statement due to the facial challenge subject matter jurisdiction. The Tenth Circuit held that the district court did not abuse its discretion by not considering the statement.)

Shields is consistent with the general trend of federal courts relying on Spokeo And Transunion dismiss the FDCPA’s claims for failing to plead sufficient harm to give Article III standing to invoke federal court jurisdiction. See Spokeo, Inc. v. Robins578 U.S. 330, 338 (2016 ); TransUnion, LLC v. Ramirez, 141 S.Ct. 2190, 2200 (2021). .’” (internal citation and omitted citation); Pennell versus Glob. tr. Mgmt., LLC990 F.3d 1041, 1045 (7th Cir. 2021) (stress and confusion not enough for FDCPA position).

Among the takeaways from Shields It is an emerging consensus by federal appellate courts that the administrative use of a third-party mail seller to send collection notices does not constitute a debt disclosure to a third party without consent under the FDCPA. As the Eleventh Circuit noted, the use of vendors involves a transmission of data, not necessarily a “disclosure” since letter vendors typically use automated systems that populate templates and print and mail letters without a person ever seeing the content. Moreover, Shields confirms that confusion and misunderstanding alone, without anything else, do not give rise to recognizable damage..

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Written by Natalia Chi

Chicago Popular; Chicago breaking news, weather and live video. Covering local politics, health, traffic and sports for Chicago, the suburbs and northwest Indiana.

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