The U.S. Bankruptcy Court for the Middle District of Florida recently held that:

  1. A bankruptcy trustee was entitled to recover $1,000 in statutory damages on behalf of each of the husband and wife debtors against a loan servicer for violating the Florida Consumer Collection Practices Act ("FCCPA") by contacting the debtors after they were represented by counsel; and
  2. The servicer could not set off the $2,000 in FCCPA damages against the balance owed on the mortgage loan because, according to the Court, allowing a set off would thwart the FCCPA's goal of deterring abusive debt collection practices; and
  3. The servicer did not violate the federal Telephone Consumer Protection Act ("TCPA") because the debtors did not "expressly and clearly" revoke their prior consent to be called using the cell phone number they provided on their loan application.

A copy of the opinion is available at:  Link to Opinion

Husband and wife obtained a loan secured by a mortgage on their home in 2007. In 2010, the wife's health deteriorated and by the end of the year, they defaulted.

The debtors hired an attorney in February of 2011. The following month, the servicer began trying to collect the balance owed on the mortgage. These efforts included calling the debtors. On one of the calls, the husband allegedly provided the name and contact information of their attorney.  After this call, the servicer allegedly continued making phone calls and sending letters to the debtors.

In July of 2011, the debtors filed a chapter 7 bankruptcy. The chapter 7 trustee then filed an adversary complaint against the servicer seeking statutory damages under the FCCPA and the TCPA.

The servicer denied the allegations of the complaint and argued that it was entitled to set off any damages against the balance owed on the mortgage. The case eventually went to trial in May of 2014.

The Court began by addressing the TCPA claim, explaining that the TCPA prohibits placing autodialed calls to cell phones without the "prior express consent of the called party."  The parties stipulated at trial that the servicer made 11 auto-dialed calls to the husband's cell phone number.

However, because the debtors had given the husband's cell phone number on the loan application and never revoked the authorization to call that number, the Court found that  this constituted "prior express consent."

The husband argued that he later revoked his consent, but the Court held that Eleventh Circuit precedent requires "express and clear revocation of consent; implicit revocation will not do."  At best, the Court found, the debtors "implicitly revoked their consent" because when asked on cross examination whether he clearly told the servicer to stop calling his cell phone, the husband admitted he did not.

The Court then turned to the FCCPA claim, explaining that "[a]ny person who violates the FCCPA is liable for actual damages, statutory damages not to exceed $1,000, court costs, and the plaintiff' reasonable attorney's fees."

The Court found that the debtors did not prove any actual damages, but were entitled to recover $1,000 each in statutory damages, rejecting the servicer's argument that the wife could not recover damages because it only communicated with the husband.

The Court reasoned that, although most of the contact was with the husband, there was unrebutted testimony that the wife saw collection notices addressed to her, which the Court held was enough to violate the FCCPA, especially when the evidence indicated that the servicer knew that the debtors had an attorney at the time.  In addition, the Court held that the FCCPA prohibits "indirect communication with a represented debtor," which the servicer did when it communicated with the husband about the debtors' joint debt.

The Court then found that the servicer was not entitled to set off the $2,000 statutory damages against the balance owed on the mortgage because, although the law generally favors set offs, "the decision to permit or disallow a setoff as to FCCPA liability is within the bankruptcy court's discretion, and a setoff in this case is unfitting."

The Court reasoned that "[i]n addition to eradicating abusive practices, the FCCPA aims to protect each consumer's right to privacy. If these goals are to be reached, consumer collection agencies must appreciate the real penalties for violating the FCCPA. Otherwise, the FCCPA will have little to no deterrent effect. If a consumer collection agency knows that it can engage in harassing and obnoxious debt collection practices with the best outcome being that it squeezes money from consumers and the worst being that the consumer's debt is merely reduced by penalties imposed under the FCCPA—with no money ever coming out of the collection agency's pocket—the collection agency will have no reason to play by the rules."

The Court concluded that the trustee was entitled to recover $2,000 in statutory damages under the FCCPA, which could not be set off against the servicer's proof of claim filed in the main bankruptcy case.