Wednesday, April 21, 2010

United States Supreme Court Rules Debt Collectors Are Not Entitled to Bona Fide Error Defense for Mistakes of Law

The United States Supreme Court handed down its decision in the case of Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA today, holding, as expected, that the Fair Debt Collection Practices Act's bona fide error defense, discussed previously on this blog here, does not apply to mistakes of law. Justice Sotomayor delivered the opinion of the Court, in which Chief Justice Roberts and Justices Stevens, Thomas, Ginsberg, and Breyer joined (with Justice Breyer also writing a separate concurring opinion). Justice Scalia wrote an opinion concurring in part and concurring in the judgment, and Justice Kennedy dissented, with Justice Alito joining in his opinion.

The majority cites several sources of authority in support of its decision, some compelling and some not so compelling. In the coming weeks, we will explain each argument advanced by the majority and the corresponding arguments made by the concurrences and the dissent. In the meantime, it is important to note the practical effect of the ruling: a debt collector or collection attorney's mistaken belief in the legality of an action under the FDCPA will not excuse him or her from liability. As a result, the only way to completely shield yourself from liability for a mistake of law is under an advisory opinion provided by the Federal Trade Commission.

It should also be noted, however, that according to the majority this decision does not affect the ability of the trial court hearing an FDCPA lawsuit to award actual damages in a de minimis amount (even zero) under § 1692k(a)(1), or as the majority puts it, "to adjust [additional] damages where a violation is based on a good-faith error," under § 1692k(b), which provides:

(b) Factors considered by court
In determining the amount of liability in any action under subsection (a) of this section, the court shall consider, among other relevant factors—
(1) in any individual action under subsection (a)(2)(A) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector’s noncompliance was intentional.
 
With this in mind, debt collectors and collection attorneys should remain dedicated to keeping abreast of developments in Fair Debt Collection Practices Act law, not only to keep themselves in compliance with the law and thereby avoid liability altogether, but to minimize their exposure to damages in the event they are sued by demonstrating their good faith.

Related Posts by Category



No comments:

Post a Comment

Comment Guidelines