Opinion ID: 182440
Heading Depth: 2
Heading Rank: 2

Heading: Supreme Court's Jerman Opinion

Text: In Jerman, the Supreme Court addressed whether the FDCPA's bona fide error defense could immunize debt collectors from liability when their violations stemmed from a debt collector's mistaken interpretation of the legal requirements of the FDCPA. Id. at 1608 (emphasis added). The plaintiff debtor in Jerman sued a law firm and an attorney for FDCPA violations, committed while they were acting as debt collectors. The FDCPA has a notice provision that requires debt collectors to send written notice to the debtor that the debt will be assumed valid unless the debtor disputes it. 15 U.S.C. § 1692g(a). [10] The collection attorney's notice letter in Jerman stated that the mortgage debt at issue would be assumed valid unless the debtor disputed that debt in writing. 130 S.Ct. at 1609. The Jerman plaintiff debtor contended that the collection attorney violated the FDCPA by imposing a requirement that the debtor dispute the debt in writing, when the FDCPA required only that the debtor dispute the debt and did not specify that it be in writing. Observing that authority was split on the issue, the district court ultimately agreed with the plaintiff debtor that this writing requirement in the collection attorney's notice letter constituted an FDCPA violation. [11] Jerman v. Carlisle, 464 F.Supp.2d 720, 724, 725 (N.D.Ohio 2006). In a later proceeding, however, the district court held that the collection attorney was entitled to the bona fide error defense. Jerman v. Carlisle, 502 F.Supp.2d 686, 697 (N.D.Ohio 2007). The Sixth Circuit affirmed. Jerman v. Carlisle, 538 F.3d 469, 471 (6th Cir.2008). The Supreme Court reversed, concluding that the FDCPA's bona fide error defense does not encompass mistakes of law or misinterpretations of the requirements of the Act itself. Jerman, 130 S.Ct. at 1611, 1615. Instead, the seven-member majority concluded that § 1692k(c)'s requirement that debt collectors maintain procedures reasonably adapted to avoid any bona fide errors referred only to measures designed to avoid errors like clerical or factual mistakes. Id. at 1614. The Supreme Court further stated, we need not and do not decide today the precise distinction between clerical and factual errors, or what kinds of factual mistakes qualify under the FDCPA's bona fide error defense. Id. at 1618 n. 12. Nor did the Supreme Court need to resolve the issue of what procedures to avoid clerical or factual errors were sufficient to entitle a debt collector to the bona fide error defense. However, in dicta the Supreme Court proffered various observations about the third element of the bona fide error defense. For instance, the Jerman majority remarked that Congress's use of the word procedures connoted a routinized process of error-checking, observing that [t]he dictionary defines `procedure' as `a series of steps followed in a regular orderly definite way.' Id. at 1614 (quoting Webster's Third New International Dictionary 1807 (1976)). The Jerman majority also noted that § 1692k(c)'s phrase the maintenance of procedures reasonably adapted to avoid any such error is more naturally read to apply to processes that have mechanical or other such `regular orderly' steps to avoid mistakes. Id. The majority offered two such examples, citing the kind of internal controls a debt collector might adopt to ensure its employees do not communicate with consumers at the wrong time of day or make false representations as to the amount of a debt. Id. (citations omitted) (emphasis added). The Supreme Court contrasted these procedures with procedures maintained to avoid mistakes in legal reasoning, which is not a mechanical or strictly linear process. Id. Here, debtor Owen argues that ICS's errors were erroneous legal interpretations of the scope of the FDCPA and therefore, under Jerman, ICS's bona fide error defense fails. We disagree with Owen's characterization. The type of errors that Owen complains about are factual or clerical mistakes regarding the type of charges she assented to in her agreement with AAA. [12] Specifically, Owen points out that her agreement with AAA (1) provided for only 1.5% monthly simple interest on principal and (2) did not contain an additional 7% Interest fee. Yet, AAA mistakenly included compound interest (1.5% interest on past-due interest) and a 7% Interest fee on her account. There is no evidence, nor does Owen contend, that ICS harbored a belief that it could lawfully operate within the bounds of the FDCPA while attempting to collect interest charges that Owen never agreed to. There is no evidence that ICS exercised any legal judgment as to the interest charges; rather, ICS indiscriminately accepted AAA's interest charges as factually accurate and proceeded to collect them. Because ICS's errors did not constitute mistakes of law, the Jerman decision does not preclude ICS's bona fide error defense. [13] Therefore, we turn to Owen's second argument: that ICS did not satisfy the third element of the bona fide error defense.