FTC Joins Justice Department in Brief Regarding FDCPA Supreme Court Case

The Federal Trade Commission has joined the U.S. Department of Justice in filing an amicus brief concerning whether the FDCPA’s “bona fide error” defense applies not just to procedural or clerical errors, but also to errors of law.

In Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 538 F.3d 469 (6th Cir. 2008), the Sixth Circuit Court of Appeals concluded the bona fide error defense available under Section 813(c) of the Fair Debt Collection Practices Act (FDCPA) applied to mistakes of law.

In Jerman, the debt collector’s law firm filed a complaint seeking foreclosure of real property owned by the consumer. The complaint included a validation notice, which provided the debt would be assumed valid unless the consumer disputed the debt in writing within 30 days. The consumer filed a complaint alleging the debt collector violated the FDCPA because it compelled consumers to dispute the debt in writing when the FDCPA imposes no such requirement.

The district court granted the debt collector’s motion for summary judgment on the grounds the bona fide error defense shielded them from liability. On appeal, the Sixth Circuit was faced with a matter of first impression over whether the bona fide error defense applies to mistakes of law. The Sixth Circuit found in the affirmative. The court concluded while the Truth-in-Lending Act expressly states "an error of legal judgment with respect to a person’s obligations under this subchapter is not a bona fide error," the FDCPA’s provision does not expressly remove legal errors from the realm of errors that may be considered bona fide. Rather, the statute refers to any error that is bona fide.

The consumer petitioned for a rehearing en banc, however the consumer’s request was denied by the Sixth Circuit on Nov. 24, 2008. The consumer then filed a petition for writ of certiorari with the U.S. Supreme Court on Mar. 30, 2009, and on June 29, 2009, the consumer’s petition for writ of certiorari was granted by the U.S. Supreme Court. See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA — S.Ct.—-, 2009 WL 803127 (U.S.), 77 USLW 3562.

On Sep. 25, 2009, the Federal Trade Commission and the U.S. Department of Justice jointly filed an amicus brief in the U.S. Supreme Court regarding Jerman. The amicus brief urges the Supreme Court to reverse the judgment of the Sixth Circuit, arguing the court’s holding is not consistent with the wording or the legislative history of the FDCPA.

Due to the significant impact this decision may have on the collection industry, ACA’s Legal Fund Committee has retained MAP attorney Michael Klutho with Bassford Remele prepare an amicus brief on behalf of ACA.

For more information view the FTC’s joint amicus brief.