Eleventh Circuit Holds That Servicer Violated FDCPA by Including Estimated Future Charges in Letter to Debtor

The United States Court of Appeals for the Eleventh Circuit recently reversed a lower court and found that a mortgage servicer violated the Fair Debt Collection Practices Act (“FDCPA”) by including estimated future attorneys’ fees in a reinstatement letter to the debtor. See Prescott v. Seterus, Inc., 2015 WL 7769235 (11th Cir. Dec. 3, 2015). In the case, the debtor defaulted on his mortgage in 2012 and the servicer prepared to initiate foreclosure proceedings. In 2013, the debtor asked to reinstate his mortgage pursuant to the terms of his note, which allowed for the reinstatement of a loan when the debtor pays all sums due, including “reasonable attorneys’ fees[.]” On September 4, 2013, the servicer sent a letter to the debtor with the total amount the debtor needed to pay to reinstate the loan, which was “good though” September 27, 2013. Included in this amount due were estimated attorneys’ fees, which were listed in a separate section of the letter entitled “Estimated Charges.” After the debtor paid the full amount requested and the loan was reinstated, the servicer refunded the estimated attorneys’ fees, as they were not incurred. The debtor then sued, alleging that the servicer’s requested for fees that had not been incurred violated the FDCPA. After the United States District Court for the Southern District of Florida granted summary judgment for the servicer, the Eleventh Circuit reversed. It found that the note only allowed the servicer to collect fees it had “incurred” or “disbursed,” which did not include future estimated fees. Therefore, because the servicer could not lawfully receive those fees until they were incurred, its inclusion in the reinstatement letter violated 15 USC 1692e(2), which prohibits “the false representation of . . . any services rendered or compensation which may be lawfully received . . . .” The fact that the servicer had clearly noted these fees as estimated and refunded them had no bearing on the Court’s finding that a violation had occurred. 

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.