In an unpublished opinion, the Southern District Court of Florida recently affirmed the dismissal of several claims brought by a borrower, Gayle Helman (“Helman”) against her bank, Bank of America, N.A. (“BANA” or “the Bank”) Helman v. Bank of America, 2017 WL 1350278  (SD Fla April 12, 2017). Helman alleged the Bank wrongfully pursued collection of a personal debt against her by continuing to send her bank statements regarding her mortgage loan and line of credit after Helman received a discharge of her debts in bankruptcy.

In her appeal, Helman challenged the bankruptcy court’s dismissal of her FDCPA[i] , FCCPA[ii] , fraudulent inducement, and negligent misrepresentation claims against BANA. The Court summarily affirmed dismissal of the FDCPA claim concluding: “…[W]here BANA both clearly is a creditor and clearly is not a debt collector under the terms of the statute, we have no difficulty concluding that the district court’s decision to dismiss Helman’s FDCPA claim was correct…”

The Court then considered BANA’s alleged violations of the FCCPA, specifically, Fla. Stat. § 559.72(9), which reads: “In collecting consumer debts, no person shall…[c]laim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate, or assert the existence of some other legal right when such person knows that the right does not exist.” Unlike the FDCPA, the Court explained the FCCPA “applies to anyone who attempts to collect a consumer debt,” including BANA. The Court concluded BANA would be in violation of § 559.72(9) if it asserted that it had a “right to proceed against Helman personally despite the discharge of her personal liability in bankruptcy.” The Court explained that a violation of this section “can occur through implied threats and statements in a communication with a debtor.” The Court then considered, through the eyes of the “least sophisticated consumer,” whether BANA’s bank statements misled Helman into thinking BANA was entitled “to collect against her personally.”

The Court concluded Helman, nor any consumer, could have been misled considering the clear language in Helman’s bankruptcy discharge[iii] as well as the clear language in BANA’s monthly statements. BANA’s monthly mortgage statement included the following disclaimer:

The Impact of the Bankruptcy: Our records indicate that in the past you received a discharge of this debt in a bankruptcy case. Section 524 of the Bankruptcy Code tells us the discharge of this debt means you have no personal obligation to repay it. The discharge also protects you from any efforts by anyone to collect this discharged debt as a personal liability of the debtor. You cannot be pressured to repay this debt. On the other hand, the security agreement allows foreclosure if the requirements under the loan documents are not met.

Similarly, the HELOC[iv] statement indicated that it was being furnished:

“for informational purposes only and should not be construed as an attempt to collect against you personally. While your obligation to Bank of America, N.A. may be discharged, by operation of law, Bank of America, N.A. has retained the ability to enforce its rights against the property securing the loan should there be a default.”

The Court pointed out the disclaimer in the HELOC statement was preceded by a potentially confusing heading which read: “If You Are Currently a Debtor in a Bankruptcy.” (Emphasis added). The Court noted the HELOC statement, in isolation, “might have given us some pause about the extent to which a least sophisticated consumer could have been misled” if their bankruptcy was not currently pending, but taken in conjunction with the language in the bankruptcy discharge and the monthly mortgage statements, it was not enough to “override a series of clear and unambiguous communications to the contrary.” The Court concluded: “The least sophisticated consumer in Helman’s position necessarily would have had at least the following knowledge: that she had been through the bankruptcy process and received a discharge; that she had no personal liability on the home mortgage; and that the debt had been discharged but that the bank could still enforce its mortgage.”

Finally, the Court affirmed dismissal of Helman’s fraudulent inducement and negligent misrepresentation claims explaining that Helman could not prove justifiable reliance, a necessary element of both claims. The Court explained, having received the discharge order and BANA’s monthly statements, “Helman would have known any representations of personal liability to be obviously false and would not have been entitled to rely on them.”

Considering the Court’s commentary regarding the potentially confusing nature of the HELOC section heading, monthly statements going to a borrower who has been discharged in bankruptcy must include clear, concise and consistent statements that the bank is not pursuing collection of a debt against the borrower personally. This holding provides clear and welcome guidance on the specific language which the Court deems acceptable in this regard and should be employed expeditiously.

[i] Fair Debt Collection Practices Act

[ii] Florida Consumer Collection Practices Act

[iii] The Court noted: “Helman’s bankruptcy discharge informed her that it ‘prohibit [ed] any attempt to collect…a debt that has been discharged’ but that ‘a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, …after the bankruptcy, if that lien was not avoided or eliminated.’” Helman, at *4.

[iv] Home Equity Line of Credit