SD Florida Holds “Estimated Fees” in Reinstatement/Payoff Quote Did Not Violate FDCPA or Parallel State Law

by Carol Lawson Esq | Feb 8, 2015 | Consumer Credit, Florida Foreclosures

Order Granting D’s MSJ; Closing Case

The U.S Court District Court for the Southern District of Florida recently entered summary judgment in favor of a servicer and against a borrower, ruling that a reinstatement or payoff letter that contained itemized estimated legal fees that the servicer did not actually incur did not violate the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et. seq. (“FDCPA”) or the Florida Consumer Collection Practices Act, Fla. Stat. § 559.55, et. seq. (“FCCPA”).

In so ruling, the district court found that the reinstatement letter, which contained clearly separated incurred legal fees and estimated future legal fees, did not violate § 1692f(1) or § 1692e of the FDCPA or § 559.72(9) of the FCCPA.

The borrower paid the full $15,569.64 to servicer on September 26, 2013, and filed this action on October 3, 2013 alleging violations of the FDCPA and FCCPA.  The servicer had not incurred the estimated legal fees at the time the borrower made his reinstatement payment and sent a refund check to the borrower for $3,175 on November 14, 2013.  At the close of discovery, the parties filed cross-motions for summary judgment.

In support of his summary judgment motion, the borrower argued that there is no genuine issue of material fact that servicer committed “textbook violations” of the FDCPA, 15 U.S.C.§ 1692f(1), and the FCCPA, Fla. Stat. § 559.72(9), when the servicer sent the borrower a dunning letter which included $3,175.00 for “estimated legal fees,” i.e., fees for services that had not been rendered.  The borrower cited to an Eleventh Circuit case in support of its FDCPA argument, Bradley v. Franklin Connection Service, Inc., 739 F.3d 606 (11th Cir. 2014), and cited to a Florida trial court opinion in support of his FCCPA argument. See Banner v. Wells Fargo Bank, No. 502007CA0008, 2011 WL 7501176, at *1 (Fla. 15th Cir. Ct. Oct. 25, 2011)).

In response and in support of its own summary judgment motion, the servicer argued that no violations occurred because borrower agreed to pay reasonable attorney’s fees, and the dunning letter included $1,125 in legal fees already incurred and clearly indicated that the remaining $3,175 in fees were “estimated.” See Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000).

The FDCPA provides, in pertinent part: “a debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (1) the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. § 1692f(1).

Also, the FDCPA provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692f(1).

The FDCPA further provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. “The false representation of (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt” also constitute violations of the FDCPA. 15 U.S.C. § 1692e(2).

The relevant portion of the FCCPA provides: “[i]n collecting consumer debts, no person shall: . . . (9) Claim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate, or assert the existence of some other legal right when such person knows that the right does not exist.” Fla. Stat. § 559.72(9).

The district court first addressed the borrower’s contention that Bradley v. Franklin Connection Service, Inc., 739 F.3d 606 (11th Cir. 2014) supports his argument that the servicer violated the FDCPA.  In Bradley, the plaintiff agreed with a medical service provider that “if this account is not paid when due and the hospital should retain an attorney or collection agency for collection, I agree to pay all costs of collection including reasonable interest, reasonable attorney’s fees (even if suit is filed) and reasonable collection agency fees.”  Once the plaintiff did not pay, the medical services provider retained a collection agency, and the collection contract between them, which did not involve the plaintiff, added a 33-and-1/3% collection fee to the balance owed before the account was transferred to the collection agency.

The Eleventh Circuit in Bradley held this violated the FDCPA because “there was no express agreement” between the plaintiff and the medical services provider “allowing for collection of the 33-and-1/3% fee.” Bradley, 739 F.3d at 610. In so holding, the Court explained that “it is the nature of the agreement between [the plaintiff and the medical services provider], not simply the amount of the fee that is important here.” The Court agreed that “the collection fee he paid violates [Section 1692f] of the FDCPA because the fee was really liquidated damages rather than the actual cost of collection,” and the plaintiff “agreed to pay the actual costs of collection; he did not agree to pay a percentage above the amount of his outstanding debt that was unrelated to the actual costs to collect that debt.”

The district court distinguished Bradley because here, the imposition of the $3,175 had a direct relation to the actual costs to collect the debt.  The letter sent to borrower indicated that the $3,175 was the amount for legal fees that the servicer estimated would be incurred between the date of the letter, Sept. 4, 2013, and the date the statement was good through—Sept. 27, 2013.  The borrower paid servicer $15,569.64 — an amount which included the estimated $3,175 — on Sept. 26, 2013, with the understanding that these attorneys’ fees were indeed an estimate

The Court also held that the fact that servicer’s estimation was not exact does not mean that it violated the FDCPA and FCCPA in the Sept. 4, 2013 letter — where the servicer clearly, and accurately, marked those fees as “estimates.” Compare Kaymark v. Bank of America, N.A., 11 F. Supp. 3d 496, 513-14 (W.D. Pa. 2014) (holding no FDCPA violation occurred where debt collector “itemized fees and costs that were yet-to-be-incurred on work that was yet-to-be-performed” in foreclosure complaint and rejecting “hypertechnical argument that the contract only provides for reasonable incurred charges for serviced performed”), and Elyazidi v. SunTrust Bank, Civ. No. DKC 13-2204, 2014 WL 824129, at *5-*7 (D. Maryland Feb. 28, 2014) (FDCPA complaint failed to state claim where “the assertions in documents attached to the warrant in debt as to the amount owed as attorneys’ fees were merely estimates of what would be due at the conclusion of the case.”), with McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d 240, 246 (3d Cir. 2014) (FDCPA complaint stated claim where Defendant did not distinguish between estimated amounts and accrued amounts: “[i]f [Defendant] wanted to convey that the amounts in the Letter were estimates, then it could have said so. It did not. Instead, its language informs the reader of the specific amounts due for specific items as of a particular date.”).

The Court also found no genuine issue of material fact regarding whether the pertinent communications satisfy the “least-sophisticated consumer” standard. See LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1193-94 (11th Cir. 2010). Not only did borrower concede that he knew the amount was estimated, but his Reply references a phone call borrower made to servicer “to complain about the jump in his reinstatement amount from $12,000.00 to over $15,000.00.” The Court noted the borrower “was specifically advised this was due to the placement of the attorney fees at issue.”

The district court also distinguished LeBlanc from this action. The plaintiff in LeBlanc sued after receiving a dunning letter from a debt collector which contained the following warning: “if we are unable to resolve this issue within 35 days we may refer this matter to an attorney in your area for legal consideration. If suit is filed and if judgment is rendered against you, we will collect payment utilizing all methods legally available to us, subject to your rights below.” The Eleventh Circuit explained that a least-sophisticated consumer could read the letter in two ways: (1) “more informative than threatening and did not threaten imminent legal action,” or (2) “an overt or thinly-veiled threat of suit.” The Court emphasized though the letter used conditional language, such as “if” and “may,” when discussing “the event of suit, the tone of the letter shifts to more forceful language . . . we will collect payment utilizing all methods legally available to us.” Id. (emphasis in original). The Eleventh Circuit found that the parties reasonably disagreed on the proper inferences that can be drawn from the debt collector’s letter, and thus, the issue was for the trier of fact.

In this case, the letter separated the incurred charges from the estimated charges, and specifically labelled which charges were estimated and which were incurred.  The Court noted that the parties cannot reasonably disagree that any inference can be drawn from the dunning letter other than that the $3,175 in fees were estimated. Cf. Pettway v. Harmon Law Offices, P.C., No. 03-CV-10932-RGS, 2005 WL 2365331, at *7 (D. Mass. Sept. 27, 2005) (letter “failed to clearly segregate what was owed from would become due and owing” created genuine issue of material fact for “least sophisticated debtor” standard); Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 565-66 (7th Cir. 2004) (reversing district court’s dismissal for failure to state a claim of FDCPA claims because “nowhere did [Defendant] explain that it was seeking attorneys’ fees of $250,” and “the unsophisticated consumer would not necessarily understand that [Defendant] was seeking $250 in attorneys’ fees, an amount allowed, but not specified, by the contract.”).

The district court also rejected the borrower argument’s the phone conversation misled him into paying the full reinstatement amount because the phone call was made just one day after the date of the dunning letter—September 5, 2013.  The district court found no basis for the assertion that the clarity of whether the $3,175 would be incurred was any different during the September 5, 2013 phone call than at the time servicer estimated the legal fees in the September 4, 2013 dunning letter.

The district court further found that the record does not contain evidence that anything during the September 5, 2013 phone call could have changed the only inference that can be gained from the dunning letter—that the $3,175 in fees were estimated. Thus, this is a case where “the only issue is the application of law to the undisputed facts,” making summary judgment appropriate. See Caceres v. McCalla Raymer, LLC, 755 F.3d 1299, 1304 (11th Cir. 2014) (holding as a matter of law that a dunning letter “would not mislead the least sophisticated consumer” where letter substituted “creditor” for “debt collector” because “the debt collector is obviously the agent of the creditor.”).

Finally, turning to the question of the borrower’s FCCPA claim, because the Court found no genuine issue of material fact regarding whether the servicer violated the FDCPA, the Court reached the same conclusion for the borrower’s FCCPA claim under Florida law. See Fla. Stat. § 559.77(5) (“In applying and construing this section, due consideration and great weight shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to the federal Fair Debt Collection Practices Act.”) (citing 15 U.S.C. § 1692, et seq.).

Accordingly, the district court entered summary judgment in favor of the servicer and against the borrower on all of the borrower’s FDCPA and FCCPA claims.

Clearwater Bankruptcy,  28870 U.S. Hwy 19 #300, Hodusa Towers, Clearwater, FL 33761,

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