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

"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.

El Contrato Escrito: La Herramienta Predilecta

No existe mejor herramienta a una disputa contractual que un documento firmado por las partes en el cual se expongan las obligaciones y acuerdos entre éstas.

New State Budget Institutes Licensure Requirement for Ohio’s Hospitals

On July 1, 2021, Governor Mike DeWine signed Ohio’s final budget codified at Ohio Revised Code 3722.01 et seq., which includes a new licensing requirement for Ohio’s hospitals. For years, Ohio was the only state in the country that did not license its hospitals. This approach will now be replaced with new, detailed requirements that will require careful review and compliance. Here are some of the highlights concerning these new changes:

Healthcare Provisions in the Ohio FY 22-23 Budget

Governor Mike DeWine signed Ohio’s Fiscal Year 2022-2023 budget bill (HB 110) into law on July 1, 2021. At almost 1,000 pages and 74.1 billion dollars, the budget lays out the State’s spending for the next two years. Below are a few highlighted provisions from the budget that will be important for the healthcare industry in Ohio

Interim Final Rule for Surprise Billing

In an effort to implement the new bipartisan No Surprises Act, on July 1, 2021, the Department of Health and Human Services (HHS), along with the Departments of Labor and Treasury, issued an interim final rule to safeguard patients against unforeseen medical bills arising from out-of-network care.

President Biden Seeks to Limit Non-Compete Agreements

Today, President Biden announced he would issue an Executive Order that calls on the Federal Trade Commission (FTC) to adopt rules to curtail worker non-compete agreements. Interestingly, a week ago, the FTC approved changes to its Rules of Practice to modernize and expedite the way it issues Trade Regulation Rules. If you have followed our alerts, we predicted the elimination of non-competes would probably happen. In 2016, then-Vice President Biden was a vocal opponent against non-compete agreements. He led the Obama administration’s initiative seeking to limit or eliminate non-compete agreements. In his presidential campaign, Biden promised to “work with Congress to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets . . ..”