The U.S. 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 Shields v. Professional Bureau of Collections of Maryland, Inc., the Tenth Circuit affirmed a lower court’s dismissal of FDCPA claims for lack of standing, confirming that a debt collector’s use of an outside mail vendor does not constitute an actionable, concrete injury.

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 increased over time.  None of the letters disclosed that the balance would increase due to accruing interest, fees, and other charges (i.e., the Miller/Avila safe harbor language that accounts for the fact that a debt may increase).  All three letters were mailed by a third party mail vendor.

The consumer brought four claims against the debt collector for various violations of the FDCPA, including (1) a violation of 15 U.S.C. § 1692e(2)(A) for falsely representing the character, amount, or legal status of the plaintiff’s debt; (2) a violation of 15 U.S.C. § 1692e(10) for using false, deceptive, or misleading representations or means in connection with the collection of debt; (3) a violation of 15 U.S.C. § 1692g(a)(1) for failing to meaningfully convey to the plaintiff the amount of debt in its initial communication or within five days thereafter; and (4) a violation of 15 U.S.C. § 1692c(b) for communicating with a third party regarding the plaintiff’s debt without consent or permission.  

The debt collector argued that the consumer lacked standing to assert any of these claims.  In dismissing the first three claims, the district court held that the consumer’s general confusion resulting from the discrepancy in the letters about the amount owed, and whether it included interest and fees, did not rise to a tangible harm sufficient to confer standing.  The court also dismissed the fourth claim, rejecting the consumer’s argument that the harm she suffered was akin to a tort of public disclosure of private facts just because the debt collector transmitted data about the consumer’s account to its third-party mail vendor to generate and send letters directly to her. 

On appeal, the consumer argued she had standing because she suffered both concrete tangible and intangible injuries.  The Tenth Circuit acknowledged that outside mail vendors 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 U.S.C. § 1692(b)), but ultimately found that the transmission of data to the mail vendor was not the kind of “publicity” sufficient to constitute harm. In doing so, it relied heavily on the Eleventh Circuit’s recent holding in Hunstein v. Preferred Collection and Management Services.  In Hunstein, the en banc court reversed prior findings of standing and found there was no harm without publicity, and no invasion of privacy occurred where (as in Shields) the disclosure of the debt did not extend beyond the third party mail vendor.  We previously discussed Hunstein as it worked its way through the courts in several blog posts (here, here, here, and here) and in an episode of the Consumer Finance Monitor Podcast.

In regards to the plaintiff’s claims based on the substance of the three letters, while noting that the FDCPA prohibits false representations about the character, amount or legal status of any debt (15 U.S.C. § 1692e(2)(A)), or use of false representation or deceptive means to collect debt (15 U.S.C. § 1692e(10)), the court found that the consumer only pleaded that the letters were generally prejudicial and caused confusion, not that they caused her to do anything as a result in reliance on them.  The court held that this confusion and misunderstanding was insufficient to confer standing. (It  is worth noting that the plaintiff had attached a declaration to her opposition to the debt collector’s motion to dismiss in which she alleged detrimental reliance resulting from the letters, but the district court declined to consider the declaration due to the facial challenge to its subject matter jurisdiction.  The Tenth Circuit found that the district court did not abuse its discretion by not considering the declaration.)

Shields is consistent with the overall trend of federal courts relying on Spokeo and TransUnion to dismiss FDCPA claims for failure to plead sufficient injury to confer Article III standing to invoke federal court jurisdiction.  See Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016); TransUnion, LLC v. Ramirez, 141 S. Ct. 2190, 2200 (2021) (“Importantly, this Court has rejected the proposition that ‘a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.’” (internal quotation and citation omitted); Pennell v. Glob. Tr. Mgmt., LLC, 990 F.3d 1041, 1045 (7th Cir. 2021) (holding stress and confusion do not suffice for FDCPA standing).

Among the takeways from Shields is an emerging consensus by federal appellate courts that the administrative use of a third-party mail vendor to send collection notices does not constitute a communication about the debt to a third party without consent under the FDCPA.  As the Eleventh Circuit has observed, the use of vendors involves a transmission of data, not necessarily “disclosure” as the letter vendors typically use automated systems that populate templates and print and send letters without a person ever seeing the contents.  Additionally, Shields confirms that confusion and misunderstanding alone, without more, does not rise to a cognizable injury..