June 14, 2016
by Graham H. Kidner
Hutchens Law Firm – USFN Member (North Carolina, South Carolina)
The recent opinion of the U.S. Court of Appeals for the Eleventh Circuit in Prescott v. Seterus, Inc., 2015 WL 7769235 (11th Cir. Dec. 3, 2015) has caused much consternation among servicers and their default services law firms because the decision arguably punishes debt collectors for providing consumers with a reinstatement or payoff quote that is actually useful. While the court appears to have applied a hyper-technical interpretation of the Fair Debt Collection Practices Act (FDCPA) in Prescott, it knew where to draw the line in the recent unpublished decision in Kinlock v. Wells Fargo Bank, N.A., 2016 WL 758797 (11th Cir. Feb. 26, 2016).
In Kinlock, following foreclosure of a residential property by Wells Fargo, one of its agents delivered a cash-for-keys letter to the former borrower (including placing a copy in his mailbox and posting it to the front door). This was done in order to provide for an amicable turnover of the property — a practice in universal use for many years that works to the mutual benefit of the property occupant and REO purchaser. Acting pro se, the borrower filed suit alleging that these actions violated the FDCPA and the Florida Consumer Collection Practices Act (FCCPA), analogous to the federal law.
FDCPA — The appellate court, in affirming the district court’s order dismissing the complaint for failure to state a claim, provided a thoughtful explanation of how a debt collector may violate the FDCPA in its communications with the consumer, even without making a direct demand for payment. Specifically, “A demand for payment need not be express. A demand may be implicit. An example of the latter is a letter that indicates that it is being sent to collect a debt, states the amount of the debt, describes how the debt may be paid, and provides the address to which the payment should be sent and a phone number.” Kinlock, at *1, citing Caceres v. McCalla Raymer, LLC, 755 F.3d 1299, 1302 (11th Cir. 2014).
FCCPA — Turning to the Florida statute, the court observed that using threats or force in the course of collecting a debt, and disclosing information concerning the existence of a debt known to be reasonably disputed, may violate state law. Kinlock, at *2, citing FLA. STAT. §§ 559.72(2) and (6).
The court held that the complaint failed to allege any facts showing that Wells Fargo had made a demand of any sort, or that Wells Fargo was attempting to collect a consumer debt. Cash-for-keys offers are usually at least grudgingly accepted, even by former borrowers. This case has to be an extreme example of the saying: “no good deed goes unpunished.” Unfortunately, the concept is not unheard of in the world of mortgage servicing when well-intended acts of a servicer or lender can land those parties in hot water. In navigating the several consumer financial protection laws applicable to servicers and debt collectors, it is advisable to adhere closely to their requirements and keep track of judicial developments interpreting those laws and their associated regulations.
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