December 9, 2009

By: Shaun Ertischek, Esq.

An important case based upon the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”), is currently before the United States Supreme Court.  This case is Jerman v. Carlisle, McNellie, Rini, Kramer, and Ulrich LPA, et al., No. 08-1200 (U.S. S. Ct.).

The FDCPA has a “bona fide error” defense which states that “a debt collector may not be held liable in any action brought under this title if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. § 1692k(c).  This means that a debt collector can violate the collection laws and escape liability with respect to certain errors.  Usually, these errors just include clerical errors – for example, listing incorrect information on a collection letter.

However, the Sixth Circuit decided that the bona fide error defense can apply to errors of law.  Therefore, according to that holding, if a debt collector violates the law under the belief that their actions did not violate the FDCPA, they can avoid liability under the defense.  However, it would seem overly broad to allow a debt collector to avoid liability based upon an incorrect legal interpretation of the FDCPA.

The current Supreme Court case will decide whether to uphold the Sixth Circuit decision and, ultimately, if the bona fide error defense applies to errors of law.  If the Court upholds the prior ruling, the bona fide error defense would become a giant shield for debt collectors to use to limit FDCPA liability.