U.S. Supreme Court Oral Arguments Scheduled for FDCPA Case

In June 2009, the U.S. Supreme Court accepted a writ of certiorari to consider whether 15 U.S.C. Section 1692k(c) of the Fair Debt Collection Practices Act (FDCPA), otherwise known as the bona fide error defense, applies to mistakes of law.

The Supreme Court accepted review of Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, in which the Sixth Circuit Court of Appeals concluded the bona fide error defense available under Section 1692k(c) of the FDCPA applies to mistakes of law.

After setting the brief scheduling order, on Nov. 2, 2009, the Court scheduled oral arguments in the case for Jan. 13, 2010. The case docket is available on the Supreme Court’s Web site. The argument calendar states the case will be heard at 11 a.m., with an unrelated case scheduled for oral argument at 10 a.m. Oral arguments typically last one hour.

All briefs from the petitioner, respondents, as well as amici are available on the American Bar Association’s Web site. A number of credit and collection industry trade associations, including ACA International, have submitted an amicus brief supporting the respondents’ position. The Federal Trade Commission (FTC), a number of state attorneys general, and various consumer advocacy groups submitted briefs supporting the petitioner.

A transcript of oral arguments will be posted on the Supreme Court’s Web site on the same day oral arguments are heard.

Summary of Jerman Decision

In Jerman, the defendant law firm filed a complaint seeking foreclosure of real property owned by the consumer plaintiff. The complaint included a validation notice that provided the debt would be assumed valid unless the consumer disputed the debt in writing within 30 days. The plaintiff filed a complaint alleging the defendant 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 defendant’s motion for summary judgment on the grounds the bona fide error 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.

Recognizing the split of authority among the courts over this issue, the court dismissed a common argument favoring a limited interpretation of the bona fide error defense. Many courts analogized the bona fide error provision under the Truth in Lending Act (TILA) with the provision under the FDCPA. The Sixth Circuit dismissed this argument because TILA expressly defined bona fide errors to be clerical in nature whereas the FDCPA does not. Rather, the language of Section 1692k(c), as well as the legislative history of the FDCPA, support a broad interpretation for the defense to apply to a violation of the Act in any manner. The court also noted protecting attorneys who commit bona fide errors of law is consistent with the Act’s intended purposes.

The appellate court affirmed the district court’s ruling, concluding the defendant successfully met its burden in asserting the bona fide error defense.

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 March 30, 2009, and the consumer’s petition was granted by the U.S. Supreme Court on June 29, 2009.