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Hernandez v. Midland Credit Management

June 27, 2006


The opinion of the court was delivered by: Rebecca R. Pallmeyer United States District Judge


Plaintiff Frank N. Hernandez, Jr. received a dunning letter from Defendant Midland Credit Management, Inc. (hereinafter, "MCM"). Along with an offer to settle Hernandez's outstanding debt at a significant discount, the letter included a privacy notice that disclosed the possibility that MCM or its corporate parent, Defendant Encore Capital Group, Inc. (hereinafter, "Encore"), might share nonpublic information about Hernandez (gathered in the course of debt collection) with certain nonaffiliated third parties unless Hernandez took affirmative steps to prevent this.

Hernandez alleges that the disclosure of such information, or the threat of such disclosure, violates the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (hereinafter, "FDCPA"). Hernandez moves for the certification of a class of Illinois debtors to whom Defendants sent this privacy notice between December 3, 2003 and December 23, 2004 and Wisconsin debtors to whom Defendants sent this privacy notice between January 11, 2004 and January 31, 2005. For the reasons explained here, Plaintiff's motion is granted.


This court recently set out much of the relevant background in its order denying Plaintiff's motion for judgment on the pleadings, Hernandez v. Midland Credit Mgmt. Inc., No. 04-7844, 2006 WL 695451, *1-2 (N.D. Ill. Mar. 14, 2006), but outlines the facts briefly here.

Roughly fifteen years ago, Illinois resident Hernandez obtained a credit card from Providian National Bank which he used for household purchases as well as car and hotel rentals. (Hernandez Dep. at 47-50.) Hernandez stopped making payments on this card in August 2000, (id. at 50,) and Providian, presumably, sold the defaulted debt sometime thereafter, although the exact date of that sale does not appear in the record. Plaintiff's reason for not paying Providian also does not appear in the record, but MRC Receivables Corp. (hereinafter, "MRC,") eventually acquired the Providian debt and contracted out collection to MCM.*fn1 (Memorandum in Support of Plaintiff's Motion for Class Certification (hereinafter, "Pltf.'s Mem.,") at Ex. A at 1.)

On November 14, 2004, MCM sent Hernandez a letter offering to settle his debt at a substantial discount.*fn2 (Id.) The letter also included a form privacy notice generated by MCM's legal department.*fn3 (Id. at 2-3; Defendant Midland Credit Management, Inc.'s Response to Plaintiff's Interrogatories (hereinafter, "Def. MCM's Resp. to Intrg.,") at 2.) The privacy notice states that Defendant Encore (the parent corporation of both MCM and MRC),*fn4 on behalf of its affiliates, including MCM, "is delivering this Privacy Notice so that you understand what nonpublic personal information we gather about you, how we use or share that nonpublic personal information, and the safeguards we have in place in order to protect that nonpublic personal information." (Pltf's Mem. at Ex. A at 3.) The privacy notice explains that:

In connection with collection on, or servicing, your account, we collect nonpublic personal information about you from the following sources:

* Directly from you, application or other forms (e.g., your name, address, social security number, telephone number and other information obtained from our communications with you);

* From your account transactions with us, our affiliates or others including, without limitation, the originating creditor (e.g., account balance, payment history, banking information and customer information);

* From consumer reporting agencies (e.g., creditworthiness or credit history); and

* From other nonaffiliated third parties (e.g., providers of location information and demographic information). (Id.) The notice states, further, that Encore and its affiliates reserve "the right to disclose all the nonpublic personal information" they collect to third parties, including:

* Financial service providers, such as mortgage bankers or other lenders;

* Non-financial companies, such as direct marketers or retailers. (Id.) Finally, the privacy notice included an opt-out provision that advised Hernandez that if he wished to prevent the disclosure of nonpublic personal information to nonaffiliated third parties, he must make an affirmative request for non-disclosure in writing. (Id.) MCM estimates that it sent a privacy notice in this form to approximately 56,793 account numbers with Illinois addresses between December 3, 2003 and March 31, 2004. (Def. MCM's Resp. to Intrg. at 6.)

Hernandez was obviously not alone in receiving this notice, but he may well be alone in his sophstication about federal laws applicable to debt collection. Hernandez has worked as a loan administrator, credit analyst, and collections manager for several companies and banks. (Hernandez Dep. at 16-20.) Although these entities limited their collection efforts to their own accounts receivable (and were therefore not covered by the FDCPA), Hernandez became familiar enough with the FDCPA's provisions to write a training manual for other creditors offering "a high-level overview" of the Act and to give presentations on it. (Id. at 20-26, 28-29, 34-35.) In October 2004, Hernandez filed suit against Risk Management Association for violation of the FDCPA; that case has since settled.*fn5 (Id. at 38-40.) Nor is this case the first action in which Hernandez has been involved in litigation with MCM. ...

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