The FDCPA is not limited to credit cards and loans; if you agreed to repay money in a consumer transaction, a collector chasing that money may have to follow federal debt collection law.
A homeowner's contractual obligation to repay excess Road Home disaster-relief grant funds arises out of a consensual 'transaction' for personal, family, or household purposes and is therefore a 'debt' under 15 U.S.C. § 1692a(5).
- Case
- Calogero v. Shows, Cali & Walsh, L.L.P.
- Citation
- 970 F.3d 576 (5th Cir. 2020), No. 19-30558
- Court or agency
- U.S. Court of Appeals for the Fifth Circuit
- Date
- August 17, 2020
- Precedential
- Yes (published)
- Law
- FDCPA
Summary
A law firm hired by Louisiana tried to recover alleged overpayments of Hurricane Katrina rebuilding grants. The district court dismissed the homeowner's FDCPA suit, ruling grant money is not a debt. The Fifth Circuit reversed, holding the signed grant agreement created a consensual exchange and the repayment obligation is a covered debt.
Background
Iris Calogero’s home in Slidell, Louisiana, was badly damaged by Hurricanes Katrina and Rita. She received a $33,392.68 grant through Louisiana’s Road Home program. To get it, she signed a package of agreements: covenants to live in the home for three years and keep it insured, a grant agreement, a limited subrogation and assignment agreement, and an affidavit. In the subrogation agreement she agreed to repay the State any insurance or FEMA money that would have reduced her grant.
More than a decade later, the law firm Shows, Cali & Walsh (SCW), identifying itself as a debt collector for the State, demanded $4,598.89 as repayment of an alleged overpayment. Calogero sued under the FDCPA. The district court dismissed, holding that grant money is disaster compensation, not a “debt.”
What the court held
The panel (Judges Wiener, Graves, and Willett; opinion by Judge James E. Graves, Jr.) reversed.
The FDCPA defines “debt” as an obligation to pay money “arising out of a transaction” in which the money, property, insurance, or services are primarily for personal, family, or household purposes (15 U.S.C. § 1692a(5)). Using the Third Circuit’s three-part test from St. Pierre v. Retrieval-Masters Creditors Bureau, the court found each part met:
- A transaction. The grant was not a one-way gift. Louisiana gave money to repair the home, and Calogero gave promises in return, including the promise to repay excess funds. That is a “consensual exchange.”
- The subject of the transaction. Government-backed funds exchanged for contractual promises fit the statute. The court rejected the argument that the FDCPA reaches only a “normal creditor/debtor relationship,” noting Congress did not write that limit into the statute.
- Personal or household purpose. The parties agreed the money was for repairing a home.
The court distinguished cases about mistaken bank deposits and salary overpayments, where there was no agreement creating a duty to repay.
Our take
The definition of “debt” is the gateway to every FDCPA claim. This decision reads that definition according to its text, and it rejects attempts to carve out obligations simply because they do not look like a typical loan. The same reasoning can matter for other repayment demands that grow out of a signed consumer agreement, such as program clawbacks or subrogation-style reimbursement claims.
On remand, the case went forward, and in 2024 the Fifth Circuit held that a jury could find SCW violated the FDCPA by threatening suit on stale debts and threatening attorney’s fees it could not recover.
What it means if you’re sued in Texas
If a collector or law firm is demanding repayment of money you received under an agreement for personal or household purposes, federal debt collection protections may apply even if the money was a grant, a benefit, or a reimbursement rather than a loan. That can affect what the collector must tell you and what it may threaten. A free case review is available if you want help deciding whether a demand you received is covered.
Takeaway
Before assuming the FDCPA does not apply to an unusual kind of bill, look at whether the obligation came from an agreement you made for personal or household purposes.
Sources
Primary authority
Secondary sources
This summary and analysis are general information, not legal advice. Later decisions, amendments or agency actions may change the law; check the current status before relying on it.