Eleventh Circuit Refuses to Impose a ‘Least Sophisticated Consumer’ Standard to Discharge Violations

Smith Debnam Narron Drake Saintsing & Myers, LLP

Smith Debnam Narron Drake Saintsing & Myers, LLP

The Eleventh Circuit recently affirmed a Florida bankruptcy court’s denial of plaintiff’s motion for sanctions. In doing so, the Court rejected the consumer’s attempt to import the FDCPA’s “least sophisticated consumer” standard to its discharge violation analysis. Roth v. Nationstar Mortg., LLC, (In Re Roth) 935 F.3d 1270 (11th Cir. 2019). 
In Roth, the consumer filed a Chapter 13 and indicated in her petition that she was surrendering certain non-homestead property which was subject to the mortgage of Nationstar’s assignor. The consumer’s Chapter 13 Plan was confirmed and after she completed her payments under the Plan, a discharge order was entered. As such, the mortgage on the surrendered property was discharged. The order stated that “a creditor may have the right to enforce a valid lien such as a mortgage or security interest. . . Also, a debtor may voluntarily pay any debt that has been discharged.” Id. at 1273. Post-discharge, Nationstar, instead of foreclosing, sent Ms. Roth an Informational Statement which contained an amount due, due date and instructions as to how to pay Nationstar. Importantly, the Informational Statement also included a lengthy disclaimer which provided as follows:

This statement is sent for informational purposes only and is not intended as an attempt to collect, assess, or recover a discharged debt from you, or as a demand for payment from any individual protected by the United States Bankruptcy Code. If this account is active or has been discharged in a bankruptcy proceeding, be advised this communication is for informational purposes only and is not an attempt to collect a debt. Please note, however Nationstar reserves the right to exercise its legal rights, including but not limited to foreclosure of its lien interest, only against the property securing the original obligation.


Based upon the Informational Statement, the consumer filed a Motion for Sanctions asserting that Nationstar’s Informational Statement was an impermissible attempt to collect a discharged debt and, therefore, violated 11 U.S.C. §524’s discharge injunction. The Bankruptcy Court denied the motion and on appeal, the district court agreed. The consumer then appealed the decision to the Eleventh Circuit.

On the appeal to the Eleventh Circuit, the issue before the Court was whether the Informational Statement was a prohibited debt collection communication under 11 U.S.C. §524. The Court held that it was not. In doing so, the Court rejected the consumer’s argument that the Court should apply the FDCPA’s “least sophisticated consumer“ standard to its §524 analysis, noting that “what counts as ‘debt collection’ under one statutory scheme is not necessarily ‘debt collection’ under the other.” Id. at 1277.

Instead, the Court looked at whether the objective effect of the Informational Statement was to pressure the consumer to repay a discharged debt. Looking at the plain language of the Informational Statement and in particular, the disclaimer language, the Court concluded the Informational Statement did not constitute an impermissible debt collection in violation of §524. The Court noted that there was a disclaimer on the face of the statement in bold print. Id. Additionally, the statement was labeled as an “Informational Statement” and did not demand payment. Instead, the statement repeatedly stated that it was for informational purposes only and was not an attempt to collect a debt. Moreover, in large letters the Statement noted that any payments would be “voluntary.” The court found that “including an ‘amount due,’ ‘due date,’ and statements about the negative escrow balance does not diminish the effect of the prominent, clear and broadly worded disclaimer.” Id. Further, the court reasoned that if it were to consider the Informational Statement a violation of the discharge injunction, “there would be little daylight between (1) a legitimate attempt by Nationstar to inform Roth how she could regain the property and (2) an unlawful attempt at debt collection in violation of §524.” Id.

Creditors should take note of the Court’s adherence to an objective standard under 11 U.S.C. §524 and its refusal to impose the FDCPA’s “least sophisticated consumer” standard upon the Bankruptcy Code. Creditors should be aware, however, that nothing in the opinion undermines the application of the “least sophisticated consumer” standard in the context of an adversary proceeding seeking damages for violations of the FDCPA.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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