A collector that threatens to sue you on a debt too old to enforce, misstates what the debt is for, or threatens attorney's fees it cannot legally recover may be violating federal law.
A reasonable jury could find a collection law firm violated 15 U.S.C. § 1692e by threatening suit on debts past even a 10-year limitations period without acknowledging the timeliness problem, by mischaracterizing the basis of the debt, and by threatening attorney's fees it had no legal right to recover; plaintiffs who alleged fear and emotional distress had standing.
- Case
- Calogero v. Shows, Cali & Walsh, L.L.P.
- Citation
- No. 22-30487 (5th Cir. Mar. 15, 2024)
- Court or agency
- U.S. Court of Appeals for the Fifth Circuit
- Date
- March 15, 2024
- Precedential
- Yes (published)
- Law
- FDCPA
Summary
A Louisiana law firm hired by the State sent two widows letters a decade after their Hurricane Katrina Road Home grants, demanding repayment and threatening suit, interest, court costs, and attorney's fees. The district court granted the firm summary judgment. The Fifth Circuit reversed, finding evidence of three separate FDCPA violations and holding the widows' emotional distress was a concrete injury.
Background
After Hurricanes Katrina and Rita, Louisiana’s Road Home program gave homeowners federally funded grants to rebuild. Recipients signed agreements requiring them to disclose other repair money they had received, and the State could recoup duplicate payments.
Iris Calogero and Margie Nell Randolph received Road Home grants in 2007. The State was notified of their earlier FEMA and insurance payments that same year. About ten years later, the State hired the law firm Shows, Cali & Walsh (SCW) to recover alleged overpayments. SCW sent Randolph a letter in August 2017 demanding $2,500 and Calogero a letter in February 2018 demanding $4,598.89. Each letter threatened “legal action” if not paid in 90 days and warned of liability for “legal interest from judicial demand, court costs, and attorney fees.” Randolph, frightened of losing her house, signed a promissory note and paid $25 a month.
The Fifth Circuit had already held in 2020 that the Road Home repayment obligations are “debts” under the FDCPA. On remand, the district court granted summary judgment to SCW on the merits. The widows appealed.
What the court held
The panel (Judges Clement, Haynes, and Oldham; opinion by Judge Andrew S. Oldham, with Judge Haynes concurring in the judgment only) reversed and remanded.
Standing. Relying on Perez v. McCreary, Veselka, Bragg & Allen, the court held that the widows’ “fear, anxiety, and emotional distress” after receiving the letters, and Randolph’s agreement to make payments, were concrete injuries. It called the firm’s contrary arguments ones that “border on frivolous.”
Time-barred debt. Collecting a time-barred debt is not automatically a violation. But “a debt-collector can run afoul of the FDCPA by threatening judicial action while completely failing to mention that a limitations period might affect judicial enforceability.” The court did not decide which limitations period applied because the letters were late “even under the most liberal, 10-year time window.” For Randolph, whose letter came just inside ten years, the 90-day deadline before suit ran past the ten-year mark, so the threat was still misleading.
Mischaracterizing the debt. SCW told Calogero she owed “insurance proceeds,” then, after her lawyer disputed it, said most of the amount was FEMA money plus a 30% “penalty” that appears nowhere in the program documents. The court held a collector “cannot demand payments on imaginary debts and then escape the FDCPA’s reach by pointing to the bottom line.”
Attorney’s fees. None of the Road Home contracts allowed SCW to recover fees in these circumstances, and no statute did. Threatening fees anyway violated § 1692e(5), which bars threats to take action that cannot legally be taken. The court said that fee threat is an independent violation even when the underlying debt is timely.
Our take
This is one of the most useful Fifth Circuit FDCPA decisions for consumers in recent years. It confirms three practical rules: an old debt plus a lawsuit threat is a problem for the collector; a collector must describe the debt accurately, not just get the total right; and a boilerplate threat of attorney’s fees is unlawful when there is no contract or statute that allows fees.
It also shows that Perez is not the end of FDCPA standing. Consumers who are actually frightened or pressured into paying can still sue in federal court.
What it means if you’re sued in Texas
Texas generally gives creditors four years to sue on most consumer debts, so a letter threatening suit on a debt older than that deserves scrutiny. Check whether your original contract actually allows attorney’s fees before you assume you owe them, and ask for an itemized explanation of what the collector says you owe. If you are already sued, limitations and improper fee demands are issues to raise in your answer, and the collector’s conduct may support a counterclaim. A free case review is available if you would like us to look at your letters or lawsuit.
Takeaway
Look hard at any demand letter that threatens a lawsuit or attorney's fees. If the debt is old or the fee threat has no basis in your contract or a statute, the letter itself may be unlawful.
Sources
Primary authority
Secondary sources
- Commentary: 5th Circuit reverses judgment in FDCPA case (Orrick InfoBytes)
- News: Fifth Circuit rules against unlawful debt collections targeting Hurricane Katrina survivors (Southern Poverty Law Center, counsel for plaintiffs)
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.