Be Careful What You Rely On: Washington Court Says Debt Collector’s Reasonable Reliance On Balance Amount From Creditor Not Enough To Avoid FDCPA Violation

In Creager v. Columbia Debt Recovery, a district court judge partially granted plaintiff’s motion for summary judgment, concluding that the debt collector’s attempts to collect an unpaid apartment debt with a balance inflated because the plaintiff had forfeited her security deposit, violated the FDCPA. The information supplied by creditor/client did not protect the debt collector.

The case started after plaintiff signed a one-year lease for an apartment but moved out after six months. After moving out, the creditor assigned the account to defendant, seeking to recover the outstanding 6 months of rent. The final billing statement from the landlord stated that the security deposit paid by plaintiff when she signed her lease had been forfeited because the tenant had terminated the lease early. 

Defendant made several attempts over a period of two years to collect on the debt, during which time plaintiff disputed the forfeiture of the security deposit. After one phone call between plaintiff and defendant, defendant contacted the creditor, and was advised that the security deposit had been properly forfeited. Plaintiff filed suit in Washington, alleging that the balance defendant was attempting to collect was inflated by $1,250 - the amount of the forfeited deposit – in violation of the FDCPA and Washington’s Consumer Protection Act.

After discovery was completed, the parties filed cross-motions for summary judgment. The trial court granted summary judgment in favor of plaintiff, concluding that the strict liability provisions of the FDCPA made defendant liable for collecting an incorrect balance even though defendant had a “reasonable belief” that the amount it was trying to collect was accurate.

Defendant argued that there was no liability because of the FDCPA’s bona fide error defense, but the court ruled that the alleged error made by defendant was not related to an interpretation or application of the FDCPA. The court instead said that “even if Defendant’s error were bona fide, Defendant fails to satisfy its burden of demonstrating that it had ‘maintained procedures reasonably adapted to avoid the violation,’” in simply relying on the representation on the validity of the debt from the creditor.