In April of 2004, Kevin Prescott obtained a loan of $160,000 from Bank of America in order to purchase a piece of real estate in Pembroke Pines, Florida. Years later in 2012, Prescott defaulted on his mortgage, and Seterus, Inc. made preparations to initiate foreclosure proceedings against him. In August of 2013, Prescott requested a reinstatement of his mortgage, citing the conditions listed in Section 19 of the security agreement he signed. His mortgage was reinstated in September and he was refunded the more than $3,000 in estimated legal fees.
A week later, Prescott filed suit against Seterus, Inc., claiming that the inclusion of attorney fees in his reinstatement balance was a violation of sections 1692e(2) and 1692f(1) of the Fair Debt Collection Practices Act, which regulates what debt collectors can and cannot do to collect on a debt. After the district court ruled in favor of Seterus, Prescott appealed the decision.
The case was heard in the U.S. Court of Appeals, Eleventh Circuit before Chief Judge Ed Carnes. The per curiam decision reversed the decision of the lower court, stating that the court of appeals agreed with the plaintiff that the inclusion of estimated attorney’s fees in Prescott’s reinstatement balance was indeed a violation of the FDCPA, which states that “a debt collector may not use unfair or unconscionable means to collect any debt.” This includes collecting any additional amount incidental to the principal obligation that was not expressly outlined in the agreement creating the debt.
The Court of Appeals agreed that an obligation to cover anticipated attorney’s fees was not listed in Prescott’s security agreement, and that he was only obligated to pay any actual costs incurred as a result of his default (since his mortgage was reinstated, nothing was owed in this regard). The court determined that the least sophisticated consumer, whom the FDCPA was created to protect, would not have understood the language of Section 19 of the security agreement to reach so broadly. Prescott also claimed that Seterus violated the Florida Consumer Collection Practices Act (FCCPA), contending that the threatened means of enforcing the debt were unlawful.