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Dreher Tomkies LLP
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PRIVACY NOTICES SENT BY DEBT PURCHASERS CONTINUE TO BE SUBJECT TO CHALLENGE UNDER THE FDCPA

The United States District Court for the Northern District of Illinois has repeatedly held that debt purchasers may be subject to liability for sending Gramm-Leach-Bliley Act (“GLBA”) privacy notices that run afoul of the requirements and prohibitions under the federal Fair Debt Collection Practices Act (“FDCPA”). See, e.g., Chapman v. Worldwide Asset Management, L.L.C., No. 04 C 7625, 2005 WL 818880 (N.D. Ill. April 6, 2005); Blair v. Sherman Acquisition, No. 04 C 4718, 2004 WL 2870080 (N.D. Ill. Dec. 13, 2004). In its most recent case addressing such practice, the district held that a debt purchaser and an affiliated collector violated the FDCPA by sending a GLBA privacy notice to a debtor in the same envelope as a collection letter. Hernandez v. Midland Credit Management, Inc., No. 04 C 7844, 2007 WL 723561 (N.D. Ill. Mar. 6, 2007). In that case, the collection letter contained the FDCPA’s so-called “mini- Miranda” disclosures, which informed the debtor that (i) the collection letter was from a debt collector, (ii) the collection letter was an attempt to collect a debt and (iii) any information obtained would be used for that purpose. The privacy notice stated that it was sent on behalf of the debt purchaser and its affiliates and indicated, among other things, that nonpublic personal information about the debtor would be collected “in connection with collecting on” the debtor’s account and that such information would be disclosed to nonaffiliated third parties unless the debtor opted out of such disclosures in writing.

The district court indicated that the conjunction of the collection letter and the privacy notice could lead a reasonable unsophisticated consumer to believe that personal information might be disclosed in connection with the collector’s attempt to collect the debt referenced in the collection letter, particularly in light of the fact that the collection letter and the privacy notice were the only two documents sent in the same envelope. The court indicated that Section 1692c(b) of the FDCPA prohibited such disclosure unless the debtor opted in as distinct from not opting out. Accordingly, the district court found that the defendant debt purchaser and collector violated Section 1692e’s prohibition against making false and misleading representations by representing that they could take action that was prohibited by Section 1692c(b). The district court indicated that the debt purchaser should be subject to liability under Section 1692e as a “debt collector” (in addition to its affiliated collector) because the debts were in default at the time they were acquired and the privacy notice indicated that it was from the debt purchaser and its affiliates. The district court did not find that the defendants violated Section 1692c(b) of the FDCPA because the defendants did not actually share the debtor’s information as described in the privacy notice before the debtor opted out of such sharing.

Notably, the district court indicated that the defendants could have complied with the GLBA without violating the FDCPA if (i) the collection letter was not sent at the same time and in the same envelope as the privacy notice, (ii) the privacy notice did not indicate that the defendants would collect and disclose information “in connection with collecting on” the debtor’s account and (iii) the privacy notice indicated that it was not sent in connection with any attempt at debt collection, but rather indicated that it was sent pursuant to unrelated offers potentially forthcoming from defendants, for which the notice was required by federal law.

  • Charles Gall and Mike Tomkies