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Supreme Court to Decide Whether Bona Fide Error Defense Applies to Mistakes of Law

January 14, 2010

The U.S. Supreme Court heard oral arguments Jan. 13 in a case with important implications for our practice as Ontario fair debt collection lawyers. In Jerman v. Carlisle, the high court is examining whether the bona fide error defense under the Fair Debt Collection Practices Act extends to a mistake of law, rather than a clerical mistake. The FDCPA says debt collectors may not be liable for violations that arise unintentionally, from a bona fide error and despite procedures intended to prevent such mistakes. The federal appeals courts are split on whether a mistake of law is eligible for this defense, with the Second, Eighth and Ninth saying no and the Sixth, Seventh and Tenth saying yes. The Sixth Circuit's decision led to this appeal.

Karen Jerman was a homeowner who received a foreclosure complaint from the defendant law firm, Carlisle, McNellie, Rini, Kramer & Ulrich. Representing Jerman's mortgage company, the Carlisle firm wrote that Jerman's debt would be assumed valid unless she contested it in writing within 30 days, as provided by the FDCPA. This was a misreading of the law, which does not require that disputes be put in writing. In fact, Jerman's mortgage was paid off, and she successfully contested the debt and got the case dismissed. She then sued the Carlisle firm for violating the FDCPA. The firm got the case dismissed by using the bona fide error defense. Jerman appealed to the Sixth Circuit, arguing that the bona fide error defense does not apply to mistakes of law. The Sixth disagreed, finding that Congress never explicitly barred the defense.

The Wisconsin Law Journal reported on the oral arguments in the case Jan. 14. During the arguments, the article said, Justice Stephen Breyer suggested that narrowing the bona fide error defense would create a sticky situation for attorneys. Under this reading, he said, attorneys who have followed the law diligently could still be liable for honest misreadings of the law. This would remove their ability to successfully represent clients. However, Justice Ruth Badger Ginsberg suggested that Congress didn't impliedly include mistakes of law in the bona fide error defense just because it failed to exclude them. Because mistakes of law are rare, she said, Congress would have explicitly included them if that was the intention. A decision is expected later in the current Supreme Court term.

As Brea debt collection abuse attorneys, we look forward to that decision. We believe expanding the bona fide error defense to include mistakes of law would be a serious mistake, because it could allow debt collectors to abuse the law. If collection agencies could avoid liability for breaking the law by claiming that they simply misread it, we do not doubt that some would intentionally do so. Individuals would still be able to challenge gross and obvious law-breaking, but the change could effectively end lawsuits over subtler violations. This would weaken the consumer protections that are the goal of the FDCPA, and discourage the private consumer-rights lawsuits that currently comprise the majority of FDCPA enforcement actions. The Federal Trade Commission, which enforces the FDCPA, has argued that a decision against Jerman would weaken its watchdog role as well.

Based in Anaheim, Howard Law PC represents people throughout California whose rights were violated by aggressive and unfair debt collectors. Both the FDCPA and a California state law, the Rosenthal FDCPA, set out strict requirements for the behavior of collection agencies. These include restrictions on when and how they may call consumers, prohibitions against threats or misrepresentations and a requirement to validate the debt on request. They also allow consumers to sue, as Jerman did, when their rights are violated. Unfortunately, relatively few consumers even realize they have these rights, and many violations go unpunished. Our Long Beach debt collection lawyers represent people who are seeking to enforce their rights. In a FDCPA lawsuit, you can claim $1,000 in statutory damages, attorney fees and any financial losses you suffered because of the debt collector's illegal behavior.

If you believe you're a victim of unfair debt collection practices and you're ready to fight back, you should call Howard Law right away. To learn more and tell us about your case, please send us an email or call us toll-free at 1-800-872-5925.