Should You Fight, Settle, or Stay? Defeat Hunstein Lawsuits with Three Simple Arguments (The Debt Collection Drill Videocast)

Since the 11th Circuit ruling in Hunstein v. Preferred in April 2021, consumer attorneys filed hundreds of “copycat” lawsuits against debt collectors in courts across the country, asserting that the use of a letter vendor by a debt collector somehow violates the Fair Debt Collection Practices Act. While the 11th Circuit will hear arguments on standing in the case later this year, debt collectors need a robust strategy now to minimize the business disruption caused by these Hunstein cases with the ultimate goal of obtaining summary judgment dismissing the claims.

In this episode of The Debt Collection Drill videocast, Moss & Barnett attorneys John Rossman and Mike Poncin discuss the best strategies for defeating Hunstein lawsuits and also considerations regarding insurance coverage and choice of counsel.


John Rossman (00:04):

Welcome to The Debt Collection Drill, the videocast featuring Moss & Barnett shareholders John Rossman and Mike Poncin, providing sage tips for collection and compliance.

Mike Poncin (00:18):

Hello, everybody. Welcome to a new and improved edition of The Debt Collection Drill. I'm Mike Poncin and with me as always is my co-host John Rossman.

John Rossman (00:25):

Thanks, Mike. Yeah, we've been having a lot of questions over the past couple years about whether we could move to a video format. And here we are in a video format. New year, new format.

John Rossman (00:33):

Mike, a lot of people today are asking us questions about the Hunstein case. The Hunstein case involved a collection agency that used a letter vendor to send a letter to a consumer. And the consumer sued claiming that the use of a letter vendor violated the Fair Debt Collection Practices Act prohibition on third-party communications. Mike, we've seen a lot of these cases since that Hunstein case came down in, I think it was April of 2021. Mike, where are we seeing these Hunstein cases be sued out?

Mike Poncin (01:01):

Yeah, John. And of course, Hunstein was in the Eleventh Circuit and is still pending. The en banc hearing will take place, I believe, next month. So we're seeing most of the litigation in the Eleventh Circuit. But to nobody's surprise, we're seeing a lot of litigation in the Second Circuit, some in the Third, some in the Seventh, and we're seeing some in the Fourth. That seems to be the five jurisdictions where the Hunstein claims are dominating right now.

John Rossman (01:24):

Sure. And Mike, I know that the Hunstein case, the decision from the Eleventh Circuit came down in April, but then it issued a new decision in November. And we've had a lot of people asking us should we stay our cases, because there's a ton of cases that were sued out after that April decision. People asking us should we stay these cases where we've been sued? Should we continue to fight them? Should we try and settle them? What's your take on what impact the second Hunstein decision from November had as well as the impact of the court's agreement to allow an en banc hearing next month to consider the case?

Mike Poncin (01:58):

Well, yes. And of course, when the Eleventh Circuit agreed to the en banc hearing, it wiped out the prior existing Hunstein decision.

John Rossman (02:07):


Mike Poncin (02:07):

So we're starting over from square one. And so at this point in time, lot of folks, including us, we've been filing motions to stay. And in the Eleventh Circuit, those have been routinely granted. We had one the other day that was opposed. Before they could submit their opposition, the court granted it. So the Eleventh Circuit, we're seeing a lot of them stayed because the court recognizes that what the Eleventh Circuit does is going to control whether or not they're standing for these cases to be heard in federal court.

Mike Poncin (02:33):

Now, with regards to other jurisdictions, because the Hunstein case was vacated, I mean first it was another jurisdiction. It wasn't applicable to the Second Circuit, to New York courts, for example. So even then they weren't willing to stay cases. So the Hunstein vacation, vacating the existing opinions didn't have any effect on the New York cases, Chicago, Illinois cases. Those cases are still moving forward. So we're seeing a lot of cases stayed right now in the Eleventh Circuit.

John Rossman (03:02):

Mike, you mentioned the word standing and I want to talk about that a little bit. As I've understood standing, it always means that if a person is harmed by an action, and we're talking about debt collection, if a person is harmed by a debt collection effort, that person would then have standing to sue in federal court under the Fair Debt Collection Practices Act. There's some question about standing in these Hunstein cases. And here again, like I mentioned, Hunstein cases involve a collection agency's use of a letter vendor. What's your take on the issue of standing and how it impacts the Hunstein cases?

Mike Poncin (03:34):

Yeah. It's an interesting question right now, standing. It's being litigated quite a bit. When you remove cases of federal court, as we've done for years, the consumer bar is filing motions to remand, arguing that there is no standing. There are certain judges that will immediately say there is no standing and send them back to state court.

John Rossman (03:52):

So Mike, if the consumer attorney is arguing there's no standing, is the consumer attorney saying my client hasn't been harmed by these debt collection efforts?

Mike Poncin (04:01):

Well, that's interesting because we see one consumer attorney who seeks six times the statutory damages, which would insinuate that his client was somehow harmed, but then seeking remand. So they're not quite one in the same. With regards to standing, you have to show a particularized and concrete injury. And there was a TransUnion Ramirez case that had come down within the past year. And that was the case that basically led to the Hunstein court granting the en banc hearing to reconsider the standing issue.

Mike Poncin (04:34):

Now, there's been three circuit courts other than the Eleventh Circuit that have issued cases addressing standing. And those were the Second Circuit, the Tenth Circuit, and the Seventh Circuit. And real recently, the Seventh Circuit had found that there was standing in a case that sounded off like an invasion of privacy-type claim. So all three courts have basically come to the same conclusion, the Second, the Seventh, and the Tenth, finding that if a claim sounds off as an invasion of privacy, therefore there is standing. And of course, in Hunstein we all know the claim is that you've shared my information with a third party who was not authorized, which would seem to sound off as a invasion of privacy claim.

Mike Poncin (05:13):

So it's yet to see what the Eleventh Circuit will do. But we do know, like I said before, many courts are tossing these back to state court where then is there standing in state court? And that's an analysis of each individual state.

John Rossman (05:26):

What astounds me about the standing argument is that someone can say, well, my client wasn't harmed enough to bring a case in federal court, but my client was harmed enough to bring a case in state court. To me, that is a non sequitor that doesn't make any sense. But nonetheless, I know it's an issue that the courts are going to ultimately have to address starting with the Eleventh Circuit.

John Rossman (05:45):

Mike, so we're defending dozens of these cases nationwide. You're defending these cases for our clients. And I know that we're bringing motions. We're looking at a motion to dismiss or a motion for summary judgment, I guess, in one case. Mike, and I know there's been a lot of different arguments that folks have talked about, about how to defeat Hunstein. The arguments have run the gamut from being fairly intelligent to being kind of out there. Mike, in your opinion, what are the top three arguments that a debt collector can make to defeat a Hunstein-type claim?

Mike Poncin (06:16):

You know and picking three is kind of tough.

John Rossman (06:17):


Mike Poncin (06:18):

There's a lot of arguments. We've all seen how many amicus briefs were filed in the Hunstein case and all the arguments set forth there. But I think the three come down to, one communicating, or not communicating, transcending information to a third-party letter vendor. The letter vendor is a medium, therefore it's not a communication to them. You're using them as a medium to convey. Another important argument is that the regulatory, Regulation F has set forth numerous times where you can use a vendor. It's not specifically set forth in the law itself, but in the commentary it provides that they understand vendors are routinely used.

Mike Poncin (06:56):

And the other one would be is that prior decisions have found, we would think of the Flood case, which was the Supreme Court of Colorado, but that looked at the FTC letter and incidental contact. You've been able to, you think about using a translator on a phone call. And in the FTC, back in 1992 said, well, that's fine to convey the information to the translator. That's not a communication. It's incidental contact. It's not a violation.

Mike Poncin (07:23):

So I think those are three of the top arguments at this point in time.

John Rossman (07:27):

So Mike, talk to me a little bit about this medium argument, this argument that the letter vendor's a medium. And I know you and I have talked about it quite a bit. But there is some historical precedent for the position that a debt collector communicating through a medium or with a medium does not constitute a communication in connection with an attempt to collect a debt, the sharing of information. And I know one instance that you mentioned relates to a translation-type service, where if you're communicating with a consumer and their preferred language is something other than English, you could use a translation service.

John Rossman (08:00):

Mike, what other circumstances since the FDCPA's been around, and 1977 was when the FDCPA was enacted, what are some other examples you can give our listeners or viewers regarding where a medium has been authorized to be used by a debt collector?

Mike Poncin (08:14):

Well, and you think about it, the FDCPA actually says you can use a telegraph service. So you're providing the information to the telegraph operator. And what's interesting, in both the translator and telegraph instances you know the translator's hearing the information about the debt, the telegraph information is likewise getting that information. A letter vendor is receiving encrypted information that no employee looks at. They don't know the debt information, what the balance is. They don't know what consumer owes how much to who. This is a automated process that sends these out without anybody actually seeing the information. So unlike the other two instances, a telegraph and a translator where they have that information, the letter vendor is actually not seeing the information that the consumer is objecting to.

John Rossman (09:02):

Yeah. I agree, Mike. I think it's something where there has to be some recognition that if people are going to be communicating with people about debts, in some circumstances there might need to be a medium to facilitate that communication.

John Rossman (09:15):

Mike, you also mentioned some previous regulatory guidance on the use of letter vendors by debt collectors. And you specifically mentioned Regulation F. And I was taking a look at Regulation F just before we were recording here. And I note that Regulation F states, the CFPB in Regulation F states that 85% of debt collectors use a letter vendor. And then there's some other comments in Regulation F that appear to authorize or at least acknowledge that debt collectors are using letter vendors. Mike, what's your opinion on how the regulatory opinions regarding the use of a letter vendor is going to impact a federal judge or a state court judge?

Mike Poncin (09:54):

Well, and keep in mind, obviously the FTC, who did it before, and now the CFPB they're tasked with interpreting the FDCPA and issuing rulings and rulemaking and whatnot. So you look at the various case law and it can be argued is it entitled to deference? Well, if it's part of the rule. There's the Chevron deference where the court should be looking to that information as having some significant value. But if it's in the commentary, it's typically not the same level of deference, but it still is persuasive. And so I do think it's important information. We've seen a lot of judges who have issued remands say that they don't think this is the type of claim that the FDCPA was intended to cover.

John Rossman (10:37):


Mike Poncin (10:37):

So I think when you look at those opinions and then you look at the regulatory advice, it seems that the court and the regulators are essentially on the same page. And we're hoping that at some point in time in the near future, there'll be summary judgments filed and that there'll be decisions on the merits.

John Rossman (10:51):

No, absolutely, Mike. And I think for 2022, for this year, if we were to give our viewers a kind of a timeline of what to expect and when regarding Hunstein, I know we have the en banc hearing coming up in February, as I understand it. We have a number of cases that I understand are ripe for summary judgment, so we could potentially see a ruling on summary judgment. You know, we could also see some regulatory opinion from the CFPB or some other regulator, although that's highly unlikely. But I do think that 2022 is the year that we are going to see some clarity on this Hunstein issue.

John Rossman (11:28):

Mike, the other thing that a lot of clients are inquiring about relates to insurance and Hunstein. And couple of issues that have come up are number one, whether or not a Hunstein-type claim would be covered by your insurance. And I know the insurance companies have taken various positions on that depending on the insurance coverage that you have. But more importantly, what a lot of collection agencies have been focused on is whether they can choose their own attorney or whether the insurance company chooses an attorney for them.

John Rossman (11:55):

And Mike, I know that in most insurance contracts there is the ability for the insured to purchase additional coverage or a rider, I guess is what they call it, that would allow the insured, the collection agency to select its own counsel. So if the insured got sued, they could choose their own counsel that they've used for years rather than have the insurance company assign counsel. Mike, what's been your experience with situations where a client is seeking to defend one of these cases and is looking at these insurance issues. How do you recommend that a client address this when faced with the Hunstein case and uncertainty regarding insurance coverage and choice of counsel?

Mike Poncin (12:36):

Well, it's an interesting question, and I could say a case-by-case basis. But of course, with the Hunstein cases, when you're seeing multiple, can they be treated as related, but what is that going to do for your deductible? We've heard instances in the past where debt collectors have a hard time finding insurance because you've submitted claims. What's going to happen there? And of course, the other thing is is sometimes these cases... We have friends in the industry that do insurance defense work. We've done insurance defense work.

John Rossman (13:02):

We do it as well. Yep.

Mike Poncin (13:03):

But sometimes when you place these with insurance and they assign counsel, next thing you know it's going to a personal injury attorney who doesn't do this type of work and isn't familiar with it and you may run into a bad decision because of it; somebody who doesn't know the processes that you go through, who's not familiar with what the debt collectors are actually doing or the industry itself. So I think it is important to negotiate that with your insurance provider, that you do be allowed to have the important say in choosing your defense counsel.

John Rossman (13:30):

No, absolutely. I think it makes a lot of sense. You know, Mike, we're going to see a lot more in these Hunstein cases this year, and we'll certainly keep our viewers and our listeners updated as these developments occur.

John Rossman (13:41):

We are out of time for today, but I'd like to thank you for another great episode of The Debt Collection Drill. And we look forward to speaking with you next time. Thank you.

John Rossman (13:48):

This video is provided only as a general discussion of legal principles and ideas. Every situation is unique and must be reviewed by a licensed attorney to determine the appropriate application of the law to any particular fact scenario. If you have legal questions, consult with an attorney. The listener of this videocast will not rely upon anything herein as legal advice and will not substitute anything contained herein for obtaining legal advice from an attorney. No attorney-client relationship is formed by this videocast, and Moss & Barnett assumes no liability for any errors contained herein or for changes in the law affecting anything discussed herein.