United States: Rising Conflict Among Federal Courts – Whether An Account Number Visible On A Debt Collection Envelope Violates The FDCPA

Last Updated: August 25 2015
Article by Laura A. Lange and Jodie N. Herrmann Lawson

Section 1692f(8) of the Fair Debt Collection Practices Act ("FDCPA") prohibits the use of any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by mail. The purpose of that prohibition is to protect the debtor's privacy and avoid disclosing to anyone who might see the envelope that a debt collection letter is inside. Last year, in Douglass v. Convergent Outsourcing, 765 F.3d 299 (3d Cir. 2014), the U.S. Court of Appeals for the Third Circuit ruled that a mere string of numbers (subsequently identified as an account number) displayed through a glassine window on the envelope of a debt collection letter violated Section 1692f(8). Following Douglass, federal courts have been inundated with similar claims. A string of recent decisions reflects discord among the district courts as to the viability of such claims.

Multiple decisions from district courts within the Second and Seventh Circuits expressly reject the holding in Douglass, dismissing the claims against the debt collectors. Perez v. Global Credit Collection, Corp., No. 14-9413 (S.D.N.Y. July 27, 2015); Gelinas v. Retrieval-Masters Creditors Bureau, Inc., No. 15-116 (W.D.N.Y. July 22, 2015); Davis v. MRS BPO, LLC, No. 15-2303 (N.D. Ill. July 15, 2015); Gonzalez v. FMS, Inc., No. 14-9424 (N.D. Ill. July 6, 2015); Sampson v. MRS BPO, LLC, No. 15-2258 (N.D. Ill. Mar. 17, 2015). In declining to follow Douglass, these district court decisions aligned with the Fifth and Eighth Circuits' as well as the Federal Trade Commission's interpretations of Section 1692f(8), which limit violations to the use of letters and symbols on envelopes indicating that the contents pertain to debt collection. Each of these decisions dismisses the relevance of the "account numbers" because any link to the debtor's account is only discoverable upon review of the enclosed letter, not on the face of the envelope. The holder of the letter is faced with a string of numbers without any knowledge or ability to infer that the numbers are linked to a debt. See e.g., Sampson, No. 15-2258 (N.D. Ill. Mar. 17, 2015) ("any hypothetical member of the public who views the envelope...would have to be blessed (or cursed?) with x-ray vision that enabled him or her to read the letter contained in the sealed...envelope" to perceive that it involved debt collection). Only one court outside of the Third Circuit has adopted Douglass. See Baker v. Credit Control, LLC, No. 14-00083, (N.D. Ind. July 15, 2015). In this unpublished opinion, Magistrate Judge Paul R. Cherry declined to adopt the interpretation of Section 1692f(8) limiting violations to the use of symbols indicating that the contents of the letter pertain to debt collection. Instead, the court adopted Douglass' assertion of a privacy interest in the account number.

While district courts outside of the Third Circuit are distancing themselves from the ruling in Douglass, at least one federal judge within the Third Circuit is expanding the scope of Douglass to include barcodes and quick response (QR) codes referencing account numbers. In two recent decisions, Judge William J. Nealon ruled that disclosure of either a barcode or QR code on a debt collection envelope that revealed a consumer's account number when electronically scanned constituted a FDCPA violation. See Kostik v. ARS Nat. Services, Inc., No. 14-2466 (M.D. Pa. July 22, 2015); Styer v. Professional Medical Management, No. 14-2304 (M.D. Pa. July 15, 2015). Because third parties could access the account information through smart phone apps designed to read barcodes and QR codes, the court held that even though the account number was encoded, the QR code was "susceptible to privacy intrusions." Another court within the Third Circuit has slightly lessened the expansion of Douglass in the area of barcodes and QR codes. In vacating a default judgment in Kokans v. ACB Receivables Management, Inc., No. 14-6560 (D.N.J. Aug. 4, 2015), Magistrate Judge Douglas E. Arpert found that a barcode that requires scanning software interfaced with the defendant's computer system to reveal any information would likely fall outside of Douglass as it would not reveal any identifying information to the public. While the decision in Kokans indicates that expansion by Judge Nealon will continue in the Third Circuit, the courts have not yet adopted a blanket prohibition of barcodes or QR codes that would not reveal consumer account information.

Even though the Douglass decision remains the law in the Third Circuit, thus far the vast majority of federal courts outside of the circuit have limited its reach. The question remains as to whether the privacy concerns associated with barcodes and QR codes containing customer information will invoke invasion of privacy claims outside of the debt collection industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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