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New Interpretation of the Fair Debt Collection Practices Act Rocks the Industry

Client Alert

"It’s not lost on us that our interpretation of § 1692c(b) runs the risk of upsetting the status quo in the debt-collection industry."

This quote from the Eleventh Circuit Court of Appeal in its April 21, 2021 opinion from the case of Hunstein v. Preferred Collection and Management Services, Inc. is possibly the biggest understatement in the history of the Fair Debt Collection Practices Act. At a minimum, the Eleventh Circuit’s opinion has sent shockwaves and fear throughout multiple sectors of the financial services industry.

At issue is the Eleventh Circuit’s interpretation of Section 1692c(b) of the Fair Debt Collection Practices Act which states:

Except as provided in section 1692b of this title, 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 post-judgment 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.

By way of background, this lawsuit originated from unpaid bills for medical treatment. The hospital assigned the unpaid bills to Preferred Collection and Management Services, Inc. (“Preferred”) which operates as a debt collector.  Preferred, like the vast majority of large financial institutions and debt collectors, contracts with a third-party vendor to physically print and mail the collection letters that Preferred sends to various individuals. In conformity with this policy, Preferred sent to its vendor certain information about the Plaintiff including, (1) his status as a debtor, (2) the exact balance of his debt, and (3) the entity to which he owed the debt. The third-party vendor then printed and mailed a dunning letter to the Plaintiff.

Most importantly, no claim was ever made that Preferred sent incorrect information or that the debt was not actually owed.

Despite the benign circumstances, the Eleventh Circuit held that Preferred’s act of communicating the Plaintiff’s information to its own agent violated Section 1692c(b) since it constituted a communication “in connection with the debt.”

The effect of the Eleventh Circuit’s decision will have a national impact on all businesses and individuals operating as a “debt collector” who are now prohibited from communicating a debtor’s information to third-party service providers and vendors (such as mail processors). Although the Eleventh Circuit recognizes the impact of its holding, it has greatly underestimated that impact. There is simply no way for any business to internalize these processes overnight. For a large number of businesses, the Eleventh Circuit’s decision will require new people be hired and trained in addition the purchasing of new equipment; all in the wake of a global pandemic.

Already, the National Creditors Bar Association, the Florida Creditors Bar Association (where the case originated), and other trade associations, have set out to file Amicus Briefs in support of Preferred’s anticipated Petition for Rehearing En Banc. These organizations fear that the Eleventh Circuit’s holding will be weaponized and used to create a new flood of litigation.

In the interim, all businesses and individuals that collect debts as part of their business must immediately review and potentially reevaluate their use of all third-party services; not just mail vendors. 

For additional questions, please contact Litigation Attorney Edward J. Brown at ejbrown@bmdpl.com.


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.