11th Circuit Affirms Dismissal of AMS FDCPA Lawsuit

The 11th U.S. Circuit Court of Appeals has affirmed a federal district court decision to dismiss a homeowner’s Fair Debt Collection Practices Act (FDCPA) lawsuit. In this FDCPA lawsuit, the plaintiff sought to be relieved from a higher mortgage payment she allegedly agreed to during bankruptcy proceedings.

Background on FDCPA Lawsuit

Plaintiff Annie W. is a homeowner who sought bankruptcy protection after she fell behind on her mortgage payments. Her petition for bankruptcy allowed her an automatic stay against foreclosure attempts by AMS Servicing, her mortgage holder.

According to the FDCPA lawsuit, when AMS asked the court to modify the stay to allow foreclosure, Annie negotiated a plan by which she would temporarily make higher payments until the arrearage was paid off. Once this occurred, she would then resume payments at the previous (lower) rate. The parties memorialized the new agreement in a consent order, which was signed by the bankruptcy judge in June 2013.

Despite this mortgage loan agreement, Annie then sued AMS in this FDCPA lawsuit to relieve her from the higher payments. She argued that the mortgage holder had violated the federal Fair Debt Collection Practices Act by requiring her to pay the higher monthly payment stated in the consent order. She argues that the FDCPA entitled her to pay only the lower amount stated in her note.

A federal court dismissed Annie’s AMS FDCPA lawsuit, reasoning that it was barred by a legal doctrine called judicial estoppel. The court reasoned that allowing Annie to proceed with her FDCPA claim, even after AMS relied on her agreement to a higher payment, would have been inconsistent with the consent order and would have given her an unfair advantage. Annie appealed the dismissal, but the 11th Circuit affirmed the lower court’s decision in March of this year.

The Fair Debt Collection Practices Act

The FDCPA is a set of federal law that prohibits abusive, deceptive, and unfair practices in the collection of certain kinds of debts. Mortgages, like Annie’s, are covered by the act, as are credit card debts, auto loans, medical bills, and other personal or family debts.

The FDCPA prohibits debt collectors from making false statements in the course of trying to collect on an alleged debt. Specifically, a debt collector may not misrepresent the amount owed, as Annie claimed AMS had in her FDCPA lawsuit. Debt collectors must also not falsely claim that they are attorneys or government agents, that the debtor has committed a crime, or that they work for a credit or reporting company. A debt collection agency or company also must not falsely represent the legal nature of any paperwork they send the debtor.

Violations of the FDCPA create a cause of action for the debtor, though the debtor must file the FDCPA lawsuit within one year from the date of the violation. If the debtor is successful, the court may award compensation for any actual loss the debtor can prove resulted from the violation. Even if there is no provable loss to the debtor, the court can award up to $1,000 per violation, plus attorneys’ fees and court costs. It is also possible to bring an FDCPA lawsuit as a class action in cases where one collector’s actions have harmed a large number of debtors in a similar way.

Judicial estoppel sometimes comes up in debt collection matters when a bankruptcy proceeding is also involved, such as in the case of Annie. The doctrine prevents a party from gaining an unfair advantage by taking inconsistent positions on the same issue in different cases. It is not intended to protect the opposing party so much as it is to prevent contradictory court decisions.

Join a Free Unfair Debt Collection Class Action Lawsuit Investigation

If a lender or debt collector engaged in unfair debt collection practices, you may have a legal claim and could be owed compensation for violations of the Fair Debt Collection Practices Act (FDCPA).

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DISCLAIMER: Debt collection itself is not illegal. However, debt collection firms collecting on consumer debts must adhere to the FDCPA. Even though debt attorneys are investigating these companies, their debt collection practices may be legal.