For the second time, the Court of Appeals for the Fifth Circuit has overturned a ruling in a Fair Debt Collection Practices Act case in favor of the defendant, this time outlining three ways that a reasonable jury could have found the defendant violated the statute when it attempted to recover money that was overpaid to a pair of elderly homeowners related to recovery efforts in the wake of Hurricanes Katrina and Rita.
The Background: The two plaintiffs had their homes destroyed during Hurricane Katrina. Both applied for grants and received funds through that program. When signing the paperwork for the grant, the plaintiffs both agree to repay the state if they received benefits from other sources — one plaintiff received funds from FEMA and the other from her home insurance — which they did not disclose.
- Ten years later, the state, through the defendant, attempted to collect those duplicative funds. Fearful she would lose her house, one plaintiff agreed to a payment plan of $25 per month.
- The plaintiff filed suit and a District Court judge dismissed the case, ruling the underlying debts in question were not covered by the FDCPA, a ruling that the Fifth Circuit overturned back in 2020.
- Back before the District Court, the plaintiffs claimed the defendant attempted to collect on time-barred debts, failed to itemize the debts in question, and threatened attorney’s fees when it wasn’t sure it could.
- The judge granted summary judgment for the defendant, ruling in its favor on all three arguments.
The Ruling: The Appeals Court ruled the District Court judge got it wrong on all three claims.
- The defendant indicated, for example, that one of the plaintiffs owed $4,598.89 in “insurance proceeds,” but when pressed by the plaintiff’s lawyer, the defendant changed the calculation, noting it included a 30% penalty for not having flood insurance. Because the defendant did not itemize the debt properly, “It is plainly an incomplete and incorrect presentation under 15 U.S.C. § 1692e to represent to a consumer that a debt is for one thing, and then switch justifications completely when pressed by counsel,” the Appeals Court wrote.
