By Ben Seal, From The Legal Intelligencer

Following a Third Circuit ruling last year finding a debtor’s account number on the outside of an envelope violates the Fair Debt Collection Practices Act, a Pennsylvania federal judge has ruled embedding that number in a bar code is equally problematic given the advent of smartphone bar-code readers.

The judge determined the use of the bar code increases the risk that the receiver could be a victim of identity theft.

U.S. District Judge William J. Nealon of the Middle District of Pennsylvania denied ARS National Services Inc.’s motion for judgment on the pleadings, holding in his opinion Wednesday that the debt collector violated Section 1692f(8) of the FDCPA by including information other than its address on an envelope.

The district court relied on the U.S. Court of Appeals for the Third Circuit’s 2014 ruling in Douglass v. Convergent Outsourcing, which held that “disclosure of the plaintiff’s account number implicated ‘a core concern animating the FDCPA—the invasion of privacy.'” It also cited to its own July 15 opinion in Styer v. Professional Medical Management, which held that disclosure of a QR code on a debt-collection envelope violated the same section of the FDCPA.

“The Third Circuit stated that the plaintiff’s account number was ‘a core piece of information pertaining to [plaintiff’s] status as a debtor and [defendant’s] debt-collection effort,'” Nealon wrote for the court in Kostik v. ARS National Services. “Moreover, the Third Circuit concluded that ‘disclosure [of the account number] has the potential to cause harm to a consumer that the FDCPA was enacted to address.'”

The FDCPA was enacted in 1977, Nealon said, “‘to eliminate abusive debt-collection practices by debt collectors, to ensure that those debt collectors who refrain from using abusive debt-collection practices are not competitively disadvantaged, and to promote consistent state action to protect consumers against debt-collection abuses.'”

Because “bar codes can be easily deciphered by consumers using widely available free applications for ‘smartphones,'” Nealon said, and an “‘account number is not meaningless,'” per the Third Circuit, ARS violated Section 1692f(8).

Lisa Kostik filed a complaint against ARS on Dec. 1, 2014, regarding a letter the company mailed to her in December 2013 in an attempt to collect a debt, Nealon said. A bar code appeared below the return address in the envelope window, which, when scanned, revealed Kostik’s account number.

“By disclosing the bar code to the general public, it increased the risk that plaintiff would be a victim of identity theft,” Nealon said.

ARS argued “imposing liability due to the possibility of illegal action by a third party is ‘inappropriate.'” It also argued the FDCPA “was not intended to prohibit the disclosure of benign symbols on any envelope sent by a debt collector as a means of communicating with a consumer by use of the mails,” Nealon said. The company conceded that Section 1692f(8) “prohibits any language or symbol from appearing on a debt-collection envelope,” but argued that courts have found benign symbols not to violate the act.

The Douglass court, however, held that disclosure of the plaintiff’s account number was not benign because “divulging such information to the public meant it ‘could be used to expose [the plaintiff’s] financial predicament,'” Nealon said. The Third Circuit further held that the “‘account number is not meaningless—it is a piece of information capable of identifying [plaintiff] as a debtor,'” Nealon said, which the FDCPA was enacted to prevent.

The defendant in Douglass “did not dispute that the plain language of Section 1692f(8) prohibits ‘including [the plaintiff’s] account number on the face of the envelope,'” Nealon said.

Kostik argued that “‘because the bar code contains plaintiff’s account number, under [Douglass] it cannot be benign,'” Nealon said.

Styer dealt with a QR code included on a debt-collection envelope that revealed the plaintiff’s name, address and account number when scanned, Nealon said. The Styer court applied Douglass, in an opinion Nealon wrote, and determined that disclosure of the QR code on the envelope was prohibited under Section 1692f(8).

Applying Douglass and Styer together, Nealon denied ARS’s motion.

Carlo Sabatini of Sabatini Law Firm in Dunmore represents Kostik. Richard Perr of Fineman Krekstein & Harris in Philadelphia represents ARS. Neither Sabatini nor Perr returned a call for comment.

Ben Seal can be contacted at 215-557-2368 or [email protected]. Follow him on Twitter @BSealTLI.

(Copies of the 16-page opinion in Kostik v. ARS National Services, PICS No. 15-1163, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •

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