Civil Litigation

THE BONA FIDE ERROR DEFENSE: What is it and how do I raise it?

Virginia Collectors Association, Inc. March 2011 Newsletter

We all know that the Fair Debt Collection Practices Act is a strict liability statute. There is, however, an exception to this rule; and that is when a collector can prove that a violation was unintentional and that the violation occurred notwithstanding the fact that the collector maintains procedures reasonably adapted to avoid such an error.

It is the consumer’s burden to prove that a violation of the FDCPA occurred. However, it is the collector’s burden to prove that the violation was the result of a bona fide error. In legal terms this is called an affirmative defense. To rely on the affirmative defense the collector has to prove by a preponderance of the evidence (51% or greater) that 1) the violation was unintentional; and 2) the collector maintains procedures reasonably adapted to avoid such violations.

With regard to the first requirement, it is necessary only to prove that the violation was unintentional, not that a particular communication or action was unintentional. Thus, the collector cannot knowingly violate the FDCPA and later blame the violation on an error.

It is usually the second requirement that proves most difficult. The instances of collectors prevailing on a bona fide error defense are far outnumbered by the instances of failure to prove the defense. The requirement that the collector “maintain” reasonable procedures speaks to the continuing nature of the responsibility to catch mistakes. Simply instituting and implementing procedures is not enough, they must be checked and updated regularly.

The procedures must also be reasonably adapted to avoid the error complained of. Reasonable procedures could include regular training on compliance issues with your collectors. Reasonable procedures also include your internal controls for scrubbing data, verifying calculations, verifying debtor information and the like. If you are collecting debts based on written contracts, you must know all of the terms of the contract to avoid collecting amounts you are not entitled to. Lawsuits are filed every day against collectors who improperly try to collect fees that they are not permitted to recover.

Here are a few examples where collectors prevailed on the bona fide error defense and avoided liability:

A complaint was dismissed against a collection agency where debtor admitted that timing of calls occasioned no actual damages, debtor presented no persuasive evidence that contents of calls were harassing, abusive, or misleading, collection agency introduced evidence that timing of calls resulted from failure to take into account difference in time zones between debtor’s location and that of collection agency, and collection agency employee testified that he called debtor in response to debtor’s request for transcript, the debt in question having arisen out of student loan. Juras v Aman Collection Service, Inc.,829 F2d 739 (9th Cir. 1987).

Debt collector was not liable under Fair Debt Collection Practices Act even though it sent two dunning letters in reference to debt discharged in bankruptcy. The letters were sent due to error regarding debtor’s name that could not have been detected with collector’s procedures, and party primarily at fault for confusion was debtor herself. The debt collector satisfied its burden under 15 USCS § 1692k(c) where it showed that violation was not intentional and resulted from bona fide error that its procedures for avoiding errors could not reasonably detect. Ross v RJM Acquisitions Funding LLC, 480 F3d 493 (7th Cir. 2007).

While it was undisputed that collection agency’s improper attempt to collect fees which were not authorized by contract or state law was unintentional, the bona fide error defense did not apply since the agency’s attempt to keep itself informed about debt-collection law through various trade association communications did not constitute reasonable procedures to avert violation. Seeger v AFNI, Inc., 548 F3d 1107 (7th Cir. 2008).

Any failure by debt collectors to make disclosure required by 15 USCS § 1692e(11) during communications with “”debtors”” was bona fide error where evidence showed conclusively that collection agency maintained procedures intended to ensure compliance with Fair Debt Collection Practices Act.   Collectors assert that they gave disclosure, which is posted over every telephone at agency, and debtors offer no evidence disputing agency’s procedures. Beattie v D.M. Collections, Inc., 754 F Supp 383 (DC Del. 1991).

To put yourself in the best position to prevail on a bona fide error defense, review your policies and procedures, making necessary changes. Educate your staff regularly. Update your systems and be certain that you have all necessary supporting documentation.

The materials available at this website or blog are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed are those of the individual author and may not reflect the opinions of the firm or any individual attorney.