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11th Circuit Finds "Cash For Keys" Offer Is Not An FDCPA Violation

The 11th Circuit Court of Appeals, which hears cases from Florida, Georgia, and Alabama, recently issued a decision regarding the FDCPA requirements for lenders who want to offer homeowners a “Cash for Keys” settlement.

In a case called Kinlock v. Wells Fargo Bank, plaintiff Dudley Kinlock lost his home to foreclosure. Following the foreclosure sale, the mortgagor Wells Fargo Bank sent Kinlock a letter offering cash in exchange for moving out of the home earlier.

Cash for Keys offers like this are very common after a mortgage foreclosure sale. The offers provide the former homeowners with the immediate funds needed to move out and find a new residence in exchange for cleaning the property and moving out earlier than the law requires.

In the case, Kinlock sued Wells Fargo for violating the Fair Debt Collection Practices Act (FDCPA) and the Florida Consumer Collection Practice Act (FCCPA). He claimed that the Cash for Keys offer letter violated state and federal consumer protection laws, and that he shouldn’t have been contacted for debt collection reasons after his foreclosure case.

The district court disagreed, and found that Kinlock had failed to show that the Cash for Keys letter was actually an attempt to collect a debt under either statute. On appeal, the appellate court affirmed the district court’s decision, but also noted that a debt collector could be liable for violating the FDCPA even when not expressly demanding payment.

The court said that a demand for payment could be implicit; for example, the debt collector could send a statement containing the amount owed, a description of the debt, and information about how the debt could be paid without explicitly demanding payment. This type of letter could still violate the FDCPA and the FCCPA without expressly attempting to collect a debt.

However, the court said that since Wells Fargo was actually offering Kinlock money without an expectation of anything in return other than turning over the house early, the letter could not be construed as an attempt to collect a debt.

Debt collectors are required to follow a complex series of rules designed to protect consumers. When a debt collector violates these rules, the consumer has the right to sue that company for damages. Even though not every case is successful, appellate decisions like these give both debt collectors and consumers guidance on what type of activities are prohibited.

If you are being harassed by debt collectors, the South Florida debt defense attorneys at Loan Lawyers can help. To schedule a free consultation and learn more about how we can help you, contact us today by calling (888) FIGHT-13 (344-4813).