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Eleventh Circuit Declines to Expand Reach of “Least Sophisticated Consumer” Standard In the Context of Sending Periodic Mortgage Statements Following Bankruptcy Discharge

The Eleventh Circuit recently clarified that sending periodic mortgage statements following a debtor’s bankruptcy discharge is not misleading to the “least sophisticated consumer.” In Helman v. Bank of America, 15-13672, 2017 WL 1350728 (11th Cir. April 12, 2017) Gayle Helman filed suit, alleging that Bank of America violated the Fair Debt Collections Practices Act (FDCPA), Florida Consumer Collection Practices Act (FCCPA), and other state laws when it sent Ms. Helman periodic mortgage statements after her mortgage loan was discharged in bankruptcy.  She claimed that the statements unlawfully attempted to collect a discharged debt and that such communications would be misleading to the least sophisticated consumer because it suggested she remained liable for the debt.

The Eleventh Circuit upheld dismissal of Helman’s claims, finding first that the FDCPA was inapplicable to Bank of America because Bank of America originated the debt at issue, and thus was not acting as a debt collector under the FDCPA. Although original creditors, such as Bank of America, are not exempt under the FCCPA, the Eleventh Circuit found that Bank of American had not violated that statute because the periodic statements sent to Helman stated “FOR INFORMATIONAL PURPOSES” and provided that the debt had been discharged in bankruptcy. Thus, Helman was under no personal obligation to repay the debt.

The Eleventh Circuit also rejected Helman’s argument that, despite these disclosures, a least sophisticated consumer might still be confused. The Eleventh Circuit held that the least sophisticated consumer would have personal knowledge from her experience with the bankruptcy process, and thus the disclosures were not misleading. Specifically, according to the Eleventh Circuit, such an ambiguity did not negate the other unambiguous disclosures made to Helman showing that the debt had been discharged and could not be collected against her. Accordingly, the Eleventh Circuit affirmed dismissal of the FCCPA claim as well as the negligent misrepresentation and fraudulent inducement claims.

In addition to providing helpful guidance on how to structure periodic disclosure statements post-bankruptcy discharge, Helman confirms that the Eleventh Circuit will continue to recognize that the “least sophisticated consumer” standard has limitations and that not every ambiguity in a communication with a debtor is actionable under the FDCPA.