When Congress enacted The Fair Debt Collection Practices Act (“FDCPA”) in 1977, the purpose was to stop creditors from using abusive, harassing and deceptive means to collect debts. Although few would question the value of such legislation, it has not been without its problems. Indeed, one of the most glaring problems has been the proliferation of lawsuits against debt collection attorneys who, given the vague language of the Act and its ever-changing body of case law, have often been forced to guess as to whether their conduct complied with the Act.
Recently, however, in a case of first impression defended by the Reminger Law Firm, the U.S. Sixth Circuit Court of Appeals recognized the difficulties faced by attorneys practicing in this area, and established that a debt collector cannot be held liable for a violation of the FDCPA when the violation constitutes a good faith, bona fide mistake of law, and reasonable procedures have been maintained to avoid such errors. See Jerman v. Carlisle, McNellie, Rini, Kramer, & Ulrich Co., L.P.A., 538 F.3d 469 (6th Cir. Ohio 2008).
In Jerman, the plaintiff filed a class action lawsuit against the Carlisle Law Firm, claiming it violated the FDCPA in connection with the filing of a foreclosure action. Under the FDCPA, upon filing the foreclosure action, the Law Firm was required to send the plaintiff a written notice of her rights. In doing this, the Law Firm’s notice informed the plaintiff that if she disputed the validity of the debt, she was required to do so “in writing.” Although the language of the FDCPA does not specifically require a dispute of a debt to be “in writing,” the Law Firm included this language in its notice because every court within the Sixth Circuit that had previously considered the issue had found that requiring a dispute of a debt to be “in writing” was not a violation of the FDCPA. Consistent with this case law, the Law Firm moved to dismiss the lawsuit as a matter of law. Relying upon a number of cases outside the Sixth Circuit, the trial court found that the Law Firm’s notice constituted a violation of the plain language of the FDCPA.
Given the trial court’s ruling, Reminger argued that the plaintiff’s lawsuit should nonetheless be dismissed under the bona fide error defense provided by the FDCPA. The FDCPA’s bona fide error defense provides that a debt collector may not be held liable if it can show: (1) that the violation was unintentional; (2) that the violation was a good faith, bona fide error; and (3) that it maintained procedures reasonably adapted to avoid the violation. The evidence showed that the Law Firm’s violation was the result of a bona fide error as the Law Firm had relied upon case law from courts within the Sixth Circuit in crafting its notice. Further, the Law Firm maintained procedures reasonably adapted to avoid a violation by, among other things, routinely attending conferences and seminars on FDCPA issues, subscribing to legal publications on debt collection issues, and maintaining a FDCPA Procedures Manual. The plaintiff argued that her FDCPA claim should not be dismissed because the majority of other U.S. Circuit Courts have recognized that the bona fide error defense applies only to clerical errors (e.g., mistakes as to the amount of the debt owed), and not to mistakes involving the interpretation of law. The trial court found that the bona fide error defense applies to mistakes of law and that the Law Firm had satisfied all prongs of the defense.
On appeal, the Sixth Circuit affirmed the summary judgment in favor of the Law Firm in a case of first impression in the Circuit. The Sixth Circuit followed sound precedent from two other Circuits and found that the bona fide error defense applies to mistakes of law and not just clerical errors. The Court found this interpretation was consistent with the express purpose of the FDCPA, which is to eliminate abusive debt collection practices rather than punishing attorneys for making an honest legal mistake in their practice.
Risk Management Tip: It is important that debt collection attorneys remain vigilant in “maintaining procedures reasonably adapted to avoid legal errors” under the FDCPA. This would include adopting and implementing procedures designed to keep the attorneys abreast of all issues in the complicated and ever-changing world of the FDCPA.
If you have any questions about the decision, or compliance with the FDCPA, or any other questions regarding Attorney Professional Liability, please call or contact any member of our Legal Professional Liability Practice Group.
