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Consumer finance companies and credit sellers spend much time and energy avoiding becoming a third-party debt collector. The Fair Debt Collection Practices Act (FDCPA) imposes serious limitations on third-party collectors. And, certainly, debt collection remains one of the principal elements of the consumer finance industry. But, we have long advocated that creditors collect their own debt, and in so doing seek to avoid becoming third-party debt collectors in order to avoid the restrictions of the FDCPA.

Well, it seems that there is now another reason to avoid being subject to the FDCPA.

In a recent lawsuit, a third-party debt collector was found liable for violating the FDCPA because it transmitted a consumer’s personal information to an outside vendor that the debt collector used to print and mail collection letters. Even though such information-sharing is a routine and common practice, the Eleventh Circuit Court of Appeals adopted the plaintiff’s argument that outsourcing this information amounted to communicating with someone other than the consumer whose debt is in collection. Doing so is a violation of the FDCPA.

Talk about unintended consequences!

Like in most industries, debt collectors rely on unaffiliated vendors to help them perform their core services. Most of the consumer credit protection statutes acknowledge the necessity of vendor services, and in one form or another, recognize such relationships to be an exception to or beyond the scope of the restrictions of the statute. However, according to the Eleventh Circuit, the FDCPA is not one of these statutes.

It remains to be seen just how significant this court decision will become. Recall that in the earliest days of the FDCPA, collection lawyers found—much to their chagrin—that they were considered debt collectors under the FDCPA. After all, by the literal language of the statute, they were.

After the initial shock of that line of cases wore off, the industry, including collection lawyers, moved on. But, it didn’t happen without some defendants paying a hefty price.

We’ll see how well the debt collection industry counters this most recent attack.