The Third Circuit Court of Appeals on Monday denied a collection agency's petition asking it to revisit a ruling that it violated the Fair Debt Collection Practices Act when it sent a collection letter that revealed a debtor's account number through the envelope's transparent address window. The court did not comment on the reason for rejecting the petition.
The case, Douglass v. Convergent Outsourcing, is believed to be the first involving FDCPA violations stemming from the use of modern technology generating an internal tracking number. The appellate decision could result in a binding precedent for the industry. Convergent Outsourcing now has 90 days to choose whether to allow the case to return to the district court for a ruling on whether damages should be awarded. It also could choose to file a formal request asking the U.S. Supreme Court to hear the case.
The FDCPA prohibits anything other than the collection agency's address appearing on an envelope that carries a collection letter. In this case, the account number was not on the envelope, but the location on the letter made it visible. Convergent Outsourcing, formerly ER Solutions, sent the letter in 2011 to collect from plaintiff Courtney Douglass, who allegedly owed the debt to T-Mobile.
The collection agency had argued that the Third Circuit three-judge panel erred in its ruling and that "every shred of evidence presented to the district court revealed that the number was innocuous." But the appellate court rejected the argument that the account number is meaningless, ruling that it is information that possibly could identify the debtor.
The Fifth Circuit and Eighth Circuit both previously read the FDCPA language to allow an exception for benign markings on an envelope - including "priority letter" and "Personal and Confidential" but those markings did not come with "the potential to cause invasions of privacy," Senior Judge Anthony Scirica ruled in the appellate decision.
"Disclosed to the public, [the account number] could be used to expose her financial predicament. Because Convergent's disclosure implicates core privacy concerns, it cannot be deemed benign," Scirica ruled.
Convergent Outsourcing, in the petition to have the case heard again, stated that the matter is a critical issue for the $55 billion collection industry because it impacts how agencies send letters to debtors, a key part of how business in the industry is done.
The collection agency argued that "this issue was resolved in favor of Convergent before the district court based upon the irrefutable (in fact, factually uncontested) evidence that Douglass had not been harmed, that the jumble of letters and numbers in question was undecipherable to anyone other than Convergent and that neither [the] plaintiff nor her 'expert' was able to articulate any manner in which Douglass could have been harmed."
Convergent Outsourcing is a member of ACA International, the largest association representing collection agencies. Officials with the collection agency could not be immediately reached for comment.