A state court judge in Cook County, Illinois recently dismissed a class action lawsuit alleging violations similar to those asserted in Hunstein v. Preferred Collection and Mgmt. Services with prejudice for failure to state a claim under the federal Fair Debt Collection Practices Act (FDCPA).
A copy of the opinion is attached.
The plaintiff filed a class action complaint in Illinois state court alleging that a debt collector violated the FDCPA by communicating her private information to a third party when it transmitted data about her debt to a third-party letter vendor. The defendant removed the complaint to federal court. After the federal court remanded the case to state court, the debt collector moved to dismiss the plaintiff's complaint arguing that the plaintiff lacked standing under Illinois law and failed to state a claim under the FDCPA.
As you may recall, the Eleventh Circuit recently ruled in Hunstein that plaintiffs lack standing under federal law to bring FDCPA claims alleging these types of violations in federal court, after vacating an earlier panel opinion holding the opposite. The Eleventh Circuit's ruling did not put an end to the issue, however, as it focused on the procedural particularities of federal standing without resolving whether the allegations constituted a substantive FDCPA violation. This Illinois state court dismissal of nearly identical allegations with prejudice adds to the authority answering that question in the negative.
Initially, the Illinois state court rejected the debt collector's argument that the plaintiff lacked standing to bring her claim under Illinois law. The court acknowledged the plaintiff's stipulation that she did not experience any actual harm and only sought statutory damages. Nevertheless, the court found that the plaintiff's stipulation did not destroy her standing in Illinois state court, noting that Illinois courts have found standing in cases seeking statutory damages for other types of federal claims. The court also noted that standing in Illinois is an affirmative defense, meaning the debt collector had the burden to disprove standing as opposed to the plaintiff having the burden to prove it.
The court then moved to the substantive merits of the plaintiff's allegations. The debt collector raised three distinct arguments in support of its position that the plaintiff could not state a claim for an FDCPA violation based on the alleged facts. First, the debt collector argued that the transmission of data to the letter vendor did not qualify as a communication under the statute. Second, the debt collector argued that the transmission was not made in connection with collector of a debt, as the statute requires. Last, the debt collector argued that the statute, legislative history, and recent authority analyzing the use of letter vendors did not support the plaintiff's interpretation of the FDCPA. The court addressed each argument.
Concerning the debt collector's argument that the transmission of data to the vendor did not qualify as a communication, the court recited the FDCPA's definition of a communication as "conveying of information regarding a debt directly or indirectly to any person through any medium." 15 U.S.C. § 1692a(2). The debtor collector suggested that letter vendors are not persons but rather are mediums used to pass information, pointing out that modern mailing services are largely automated. The court found that the debt collector's position would improperly require it to consider additional facts outside of the plaintiff's complaint at the pleading stage. The court therefore rejected the debt collector's argument that its alleged conduct did not qualify as a communication.
The court next considered the debt collector's argument that it did not transmit information to the vendor in connection with the collection of a debt. Noting the Seventh Circuit's factors for determining whether a communication qualifies as actionable under the FDCPA, the court determined that the plaintiff's complaint did not meet any of those requirements. The debt collector did not and would not have had any reason to demand payment from the vendor. Nor did the plaintiff have any relationship with the vendor such that the communication could have induced either the vendor or the plaintiff to pay the debt. Further, the purpose and context of the communication showed the debt collector plainly did not transmit the information to the vendor to induce payment. Thus, the court found that the debt collector's alleged communication could not have been made in the collection of a debt.
Finally, the court found that communications between a debt collector and a vendor do not fall within the purpose and legislative history of the FDCPA and are not the type of abusive debt collection practices Congress intended the FDCPA to prevent. Accordingly, the court dismissed the plaintiff's complaint with prejudice.
Ralph T. Wutscher
Maurice Wutscher LLP
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