The United States Supreme Court recently held that the bona fide error defense to a violation of the Fair Debt Collection Practices Act ("FDCPA") does not apply when the violation results from a debt collector's mistaken interpretation of the legal requirements of the FDCPA. A copy of the opinion is attached.
A law firm's foreclosure complaint included a Notice served on a debtor stating that her debt would be assumed to be valid unless she disputed it, in writing. After the foreclosure action was withdrawn, the debtor filed a lawsuit for damages under the FDCPA, alleging that the law firm had violated §1692g of the FDCPA by requiring that she dispute the debt in writing. The district court found that the law firm had violated §1692g but that it was shielded from liability by the FDCPA's "bona fide error" defense in §1692k(c), because the violation was not intentional, resulted from a bona fide error and occurred despite the maintenance of procedures reasonably adapted to avoid any such error. The Sixth Circuit affirmed, holding that §1692k(c) "extends to mistakes of law." The Supreme Court granted certiorari in light of a conflict among the circuits regarding the scope of the FDCPA's bona fide error defense.
In a 7-2 decision, the Supreme Court reversed the judgment of the Sixth Circuit. Justice Sotomayor delivered the opinion of the Court, joined by Justices Roberts, Stevens, Thomas, Ginsburg, and Breyer. Justice Scalia concurred in part and concurred in the judgment. Justices Kennedy and Alito dissented. Because the question was not raised on appeal, the Court did not address whether inclusion of an "in writing" requirement in a notice violates §1692g.
In declining to adopt an expansive reading of the bona fide error defense to include all types of error, including mistakes of law, the Court first pointed out the long recognized maxim that "ignorance of the law will not excuse any person, either civilly or criminally," such that an act may be "intentional" for purposes of civil liability, even if the actor lacked actual knowledge that its conduct violated the law. In support of this holding, the Court pointed to other circumstances, such as in the Federal Trade Commission Act, where Congress had more clearly demonstrated its intent to provide a mistake of law defense to civil liability by including explicit language to that effect, which is not present in §1692k(c).
The Court found additional support for its holding in the context and history of the FDCPA, noting a protection separate from the bona fide error defense in §1692k(e) of the FDCPA for "any act done or omitted in good faith in conformity with any advisory opinion of the [FTC]" and reasoning that debt collectors would rarely need to consult the FTC if the bona fide error defense applied also to mistakes of law. The Court also noted that Congress copied verbatim the pertinent portions of TILA's bona fide error defense into the FDCPA, after there Federal Courts of Appeals had held that TILA's bona fide error defense only referred to clerical errors (before TILA's bona fide error defense was amended).
Finally, the Court disagreed with the argument that its interpretation of the bona fide error defense would have "unworkable practical consequences" and result in "a flood of lawsuits," which, in the dissent's view would create "an irreconcilable conflict between an attorney's personal financial interest and her ethical obligation of zealous advocacy on behalf of a client." The Court reasoned that the FDCPA contains provisions that expressly guard against abusive lawsuits and attorney liability and that "it is hardly unique" to impose some constraint on a lawyer's advocacy.
Let me know if you have any questions. Thanks.
Ralph T. Wutscher
Kahrl Wutscher LLP
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