An August decision by the U.S. Court of Appeals for the Seventh Circuit holding that an e-mail from a debt collector providing hyperlinks to disclosures required by the Fair Debt Collection Practices Act (FDCPA) actually violates that statute carries implications for the regulated community, which may have to modify its e-mail practices.
In a separate development, the Consumer Financial Protection Bureau has extended to Sept. 18 the public comment period on its proposed rulemaking implementing the FDCPA. The proposed rule, published for comment in May, would amend the part of the implementation that prescribes rules governing debt collection communications and disclosures. As proposed, hyperlinked e-mails would be allowed in certain circumstances.
The Seventh Circuit’s decision, coming on the heels of the CFPB’s proposed rulemaking, “is important in that it is the first circuit-level decision to address and comment on the use of hyperlinks to deliver FDCPA-required validation notices via e-mail,” observed Stefanie Jackman, a partner at Ballard Spahr and the chair of its debt collection team. “While there are a number of circumstances that may allow future litigants to distinguish or attempt to limit this decision to its specific fact pattern, it certainly gives rise to some doubt about the ability to use to hyperlinks in this way.”
Seventh Circuit sides with a consumer
Beth Lavallee filed suit against debt collector Med-1 Solutions, LLC, which was trying to recover two unpaid medical bills. Under the FDCPA, debt collectors must disclose certain information to debtors within a certain period of time. Med-1 had sent two e-mails, one for each bill, to Lavallee with hyperlinks requiring the recipient to click through multiple screens to access a PDF document containing the required disclosures. Lavallee maintained she did not learn of these debts until she received a phone call from her healthcare provider about a separate debt and was informed the two bills at issue in this case had been referred to Med-1 for collection. Med-1’s own records showed she had not clicked on the hyperlinks in the e-mails.
Affirming a magistrate judge’s decision, the Seventh Circuit held the hyperlinked e-mails do not qualify as a “communication” as defined in the FDCPA because they did not convey information regarding a debt and did not contain statutorily mandated disclosures. The appeals court rejected Med-1’s argument that the information available via an e-mailed hyperlink is akin to information printed on a letter inside an envelope, calling the analogy inapt.
“An envelope is merely a means of transmitting a letter bearing a substantive message,” the three-judge panel, in an opinion written by Seventh Circuit Judge Diane Sykes, wrote. “The letter in Med-1’s analogy clearly ‘contains’ the information it imparts,” she continued. “Conversely, Med-1’s e-mails contained nothing more than hyperlinks—gateways to an extended process that ends in the relevant message.”
Both the CFPB and the Association of Credit and Collection Professionals (ACA International) had filed amicus (friend of the court) briefs in the case. The CFPB’s brief supported the consumer; ACA International sided with the debt collector.
Significance for the compliance community
The Seventh Circuit decision seems to be in direct opposition to the CFPB’s proposed rule, published for comment this past spring, which specifically would allow a debt collector to deliver required disclosures by hyperlink provided that, among other things, the consumer was first given notice and the opportunity to opt out.
“Until there is further clarity and case law, this decision cautions against using hyperlinks to deliver FDCPA validation notices within the Seventh Circuit (if not elsewhere),” Jackman cautioned.
Part of the dissonance stems from the existence of a statutory regime that has not quite kept pace with technological developments. “Congress passed the Fair Debt Collection Practices Act in 1977, well before the prevalence of the internet, e-mails, and smart phones,” observed Yolanda Strader, a shareholder at Carlton Fields.
“Debt collectors utilizing secured e-mail messages should be aware of the Lavallee ruling and take steps to ensure their e-mails, to the extent such e-mails are intended to be ‘initial communication[s]’ under the FDCPA, should avoid the use of hyperlinks and a ‘digital pathway’ in order to access the required disclosures,” Strader suggested. “Until the CFPB clearly articulates the best means by which such disclosures should be made, a debt collector’s e-mail sent to a debtor as an initial communication should include the required disclosures in the body to avoid any compliance issues.”
Lori Tripoli is a writer based in the greater New York City area who focuses on legal and regulatory issues