In Prescott v. Seterus, Inc., 2015 WL 7769235, at *3-4 (C.A.11 (Fla.),2015), the Court of Appeals for the Eleventh Circuit held that a reinstatement letter that required the debtor to pay estimated future attorneys’ fees as a condition of reinstatement violated the FDCPA because the demand was inconsistent with the security agreement.
The security agreement does obligate Prescott to pay for attorney’s fees and other expenses that Seterus actually incurred as a result of his default, but nothing in it explicitly states that Prescott must pay estimated fees for future legal services. The question is whether the least sophisticated consumer would have nonetheless understood the agreement to obligate Prescott to pay such fees. See LeBlanc, 601 F.3d at 1200–01. The answer is no. In order to reinstate his loan, Section 19 of the security agreement required that Prescott pay all past-due amounts, including the fees and costs incurred as a result of his default; completely cure any defaults; and “take such action as Lender may reasonably require to assure that Lender’s interest in the Property and rights under the Security Instrument and [Prescott’s] obligation to pay the sums secured by [the] Security Instrument shall continue unchanged.” . . . Prescott also contends that the estimated attorney’s fees charged by Seterus violated § 1692e of the FDCPA. We agree. That section provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt,” including “[t]he false representation of (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.” 15 U.S.C. § 1692e(2). In granting summary judgment to Seterus on that claim, the district court focused on the fact that Seterus had not misrepresented the nature of the estimated fees in the reinstatement letter. It is true that Seterus clearly separated the estimated fees from those already incurred and conspicuously marked those charges as “estimated.” Even the least sophisticated consumer would have understood that the estimated fees were just that—estimates. See Elyazidi v. Suntrust Bank, 780 F.3d 227, 235 (4th Cir.2015). So it is clear that Seterus did not falsely misrepresent the character of those fees as prohibited by § 1692e(2)(A). But § 1692e(2) also prohibits the false representation of any “compensation which may be lawfully received by any debt collector for the collection of a debt.” 15 U.S.C. § 1692e(2)(B). Seterus violated that provision when it demanded that Prescott pay estimated attorney’s fees before it would reinstate his loan, because Seterus could not “lawfully receive” those fees under the terms of the security agreement.5 That is true even if Seterus believed it was entitled to those fees. See Wise v. Zwicker & Assocs., P.C., 780 F.3d 710, 713 (6th Cir.2015) (noting that, under § 1692e, “if a debt collector seeks fees to which it is not entitled, it has committed a prima facie violation of the Act, even if there was no clear prior judicial statement that it was not entitled to collect the fees”); Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 449 (6th Cir.2014) (describing the FDCPA as “plac [ing] the risk of penalties on the debt collector that engages in activities which are not entirely lawful, rather than exposing consumers to unlawful debt-collector behavior without a possibility for relief”). We therefore reverse the district court’s grant of summary judgment to Seterus on Prescott’s § 1692e(2) claim.