Real Limits Placed on Bona Fide Error Defense- 9th Circuit Reaffirms Strict Liability for Debt Collectors Who Misstate Amount of Debt

This week a panel of the 9th Circuit Court of Appeals handed down an important decision for consumers in Alaska and other western states. The panel reaffirms the Fair Debt Collection Practices Act's requirement that debt collectors must take meaningful actions to assure that the amounts they attempt to collect are accurate.

The question decided was whether the "bona fide error" defense under FDCPA provides debt collectors a wide open escape hatch from accountability or will protect debt collectors only where they actually institute measures to ensure that debtors are asked to pay amounts they actually owe.

In this Arizona district case, Reichert v National Credit Services, No. o6-15503, Slip Op. dated 7/7/2008, Circuit Judge Mary Schroeder, writing for the panel, states

If the bona fide error defense is to have any meaning in the context of a strict liability statute, then a showing of “procedures reasonably adapted to avoid any such error” must require more than a mere assertion to that effect. The procedures themselves must be explained, along with the manner in which they were adapted to avoid the error. ... Only then is the mistake entitled to be treated as one made in good faith. Because NCS submitted only a conclusory declaration stating that it maintained procedures, we hold that it failed to establish a bona fide error defense under the FDCPA.

Public Citizen's Deepak Gupta represented Richard Reichert in this appellate victory for consumers in the 9th circuit states. Consumer rights attorneys will find this reaffirmation and clarification of debt collector's strict liability under FDCPA very useful in protecting harassed debtors from both unscrupulous and sloppy debt collectors.