An Outlook On Hustein for 2022

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Mar 03, 2022

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On April 21, 2021, the Eleventh Circuit Court of Appeals issued a ruling on third party disclosures under the FDCPA that is still making waves in our industry, nearly one year later.

The Hunstein decision has become a household name in the debt collection world, with implications that stretch to agencies, vendors and debt buyers alike.

We sat down with Rick Perr, industry defense lawyer and Co-Managing Partner at Kaufman, Dolowich Voluck, to hear the context surrounding the case, gain a deeper understanding of the rehearing and ultimately, prepare for the outcome of the rehearing.

Watch our conversation with Rick below or keep reading to hear:

🔎 An in-depth background of the Hunstein case and why the Eleventh Circuit decided to rehear it

💥 What the implications might be for the industry, depending on the new decision

🙃 How agencies and vendors alike can position themselves for the future, despite the uncertainty surrounding Hunstein

If you’re ready to confront the Hunstein decision head on and plan for the year ahead in spite of it, this episode is for you, and we know you’ll learn a lot (because we sure did!)

Play Video about Hunstein Case

A Deep Dive Into The Background Of The Hunstein Case (1:35)

Plaintiffs and consumer attorneys misinterpreting the spirit of the FDCPA, or what Rick calls “novel theories,” are nothing new. The industry is not a stranger to predatory attorneys trying to make a quick buck off of a practice that was designed with the consumer in mind.

In this case, it was section 1692 of the FDCPA, one that agencies are very familiar with – you can’t communicate with a third party about a consumer having a debt.

The spirit of this section, understandably, is to prevent debt collectors from going to a neighbor or a friend, using the consumer’s debt as leverage to try and coerce the consumer to make a payment.

In this case, however, it was alleged that the mere transmission of the consumer’s information from the debt collection agency to the letter vendor constituted a third party disclosure.

Ultimately, a panel of judges concluded that:

The plaintiff had standing to bring the claim, meaning it could be brought in federal court and the plaintiff had enunciated a harm
There could be a cause of action for this type of conduct

At this point, Rick and his team became involved and sought the entire court to rehear the case and issue a decision.

Transunion vs. Ramirez and the Issue of Standing (4:34)

At the same time that all of this was taking place, the Supreme Court released the Transunion vs. Ramirez decision, which re-highlighted the limited basis upon which standing could be granted in Federal Court.

After this decision was released, the panel that originally issued an opinion on Hunstein re-issued their opinion. Two of the judges doubled down that the plaintiff had standing, with one Judge reversing his stance and saying that he did not believe there was a cause of action.

An oral argument was held in February of 2022, and at the time that this blog was published, we were still awaiting a decision on the rehearing.

Is There Standing Or No Standing?

If they decide there is no standing (in other words, the claim cannot be brought to Federal Court,) the case will likely be brought to State Court and start from the very beginning.

If the court decides that there is standing, the court will have to decide whether or not there is a cause of action that can possibly go forward.

"The Hunstein Variant" (7:02)

Rick explains that Hunstein-style cases have been popping up across the country. For example, claims like – If a debt buyer send the account to a collection agency, that’s a communication that could be considered a third party disclosure.

The good news is that other circuits have said these claims have no standing, and the cases are sent back to state courts, where they are not as familiar with the FDCPA. All this means is that there may not be uniformity in the way these decisions are made.

Why Is The Rehearing Taking Place? (9:17)

The rehearing is to determine whether or not the plaintiff in the case has standing – or, if they suffered real harm.

Since the release of the Transunion decision, courts have been conducting what Rick calls “A Docket Cleaning” of cases where the plaintiff cannot prove there was a concrete injury.

So, the rehearing of the Hunstein case is centered around the issue of standing – whether or not a letter vendor actually saw the information about the debt, and if they did, if this caused concrete harm or injury to the plaintiff.

What Are The Implications For The Industry? (15:00)

Rick explains that there is no cause for panic, with either outcome.

If the Eleventh Circuit decides that there is no standing, the case would still return to State Court and begin from square one.

If the court decides there is standing, there are eleven other circuit courts that would have to come to the same conclusion, and there is a slim likelihood that the Supreme Court would take on this type of case.

Even if the case gets past standing and cause of action, it would move to the discovery stage, where the plaintiff would have to prove that the letter vendor actually saw the contents of the letter.

This would be thousands of dollars worth of time, and no attorney would be willing to find that one in a million case.

The Outlook for 2022: Mostly Positive (18:22)

More judges have said they don’t believe this type of case has standing than not. In addition, agencies who use vendors are not doing so to coerce a consumer into paying their debt – they are doing it for the benefit of the consumer.

It’s important to keep in mind that the FDCPA was written in 1978, when the primary communication method was by telegram, and letter vendors didn’t exist.

Even though this section is now being weaponized against collection agencies, the industry has banded together to fight these cases. It’s firmly believed that bringing all processes in-house, forcing agencies to acquire the expertise of vendors, would be detrimental to the consumer.

What Can The Industry Do To Proactively Prepare For The Outcome? (22:22)

The uniform conclusion from legal experts is that this case is ultimately winnable and will not proliferate throughout the country.

Rick recommends that you don’t jump to bringing all your processes in house and “sell out” – it doesn’t advance anything.

Keep doing what you’re doing, invest in your relationships with your vendors, and keep lines of communication open.

This information does not, and is not intended to, constitute legal advice; and may not be used as legal advice. Instead, all information is for general informational purposes only.

About The Author

Alex Villafranca

Alex is the CEO, co-founder and Head of Revenue at Arbeit, a better outbound communication software that makes businesses more profitable.