Opinion ID: 2002502
Heading Depth: 1
Heading Rank: 1

Heading: bona fide error

Text: The WCA establishes several remedies for its violation which are to be liberally administered. [8] It does not, however, go so far as to mandate strict liability. Sec. 425.301 (3), Stats., creates an exception to certain penalties of the WCA. This exception applies if the violator shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. [1] This court has not previously construed sec. 425.301 (3), Stats., to determine what constitutes a bona fide error. There is, however, some guiding authority. A provision of the Federal Truth in Lending Act (TILA) also creates a bona fide error defense. At the time this action arose, 15 U.S.C. sec. 1640(c) (1976) provided: A creditor may not be held liable in any action brought under this section for a violation of this subchapter if the creditor shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.  (Emphasis added.) The federal case law interpreting this provision must be accorded considerable weight in construing sec. 425.-301 (3). The language of 15 U.S.C. sec. 1640(c) is identical in pertinent part to sec. 425.301(3). Thus the federal cases are persuasive authority. Wisconsin Environmental Decade v. Public Service Commission, 79 Wis. 2d 161, 174, 255 N.W.2d 917 (1977); In re Estate of Kersten, 71 Wis. 2d 757, 763, 239 N.W.2d 86 (1976). Moreover, one of the purposes and policies of the WCA is [t]o coordinate the regulation of consumer credit transactions with the policies of the federal consumer credit protection act. Sec. 421.102(2) (d). The TILA is part of the consumer credit protection act. Therefore, sec. 425.301 (3) should be harmonized with related provisions of the TILA, particularly 15 U.S.C. sec. 1640(c). [2] The vast majority of federal courts have held that the bona fide error defense applies only to violations caused by unintentional acts such as inadvertent clerical errors. Errors of law, even if made in good faith, do not qualify for the defense. [9] Ratner v. Chemical Bank New York Trust Company, 329 F. Supp. 270, 281-82 (S.D. N.Y. 1971); Haynes v. Logan Furniture Mart, Inc., 503 F.2d 1161, 1167 (7th Cir 1974); Palmer v. Wilson, 502 F.2d 860, 861 (9th Cir. 1974); Thomka v. A. Z. Chevrolet, Inc., 619 F.2d 246, 250-51 (3d Cir. 1980); McGowan v. King, Inc., 569 F.2d 845, 849 (5th Cir. 1978); Ives v. W.T. Grant Company, 522 F.2d 749, 758 (2nd Cir. 1975). [10] We agree with the foregoing authorities and adopt their holding as the proper construction of sec. 425.301 (3), Stats. The fact that the bona fide error defense under the WCA covers a broader range of violations than the federal provision does not, as the Bank suggests, require that it be given a broader interpretation. The policies behind the WCA support the application of the federal precedent to sec. 425.301 (3). The basic purpose of the remedies set forth in Chapter 425, Stats., is to induce compliance with the WCA and thereby promote its underlying objects. [11] Penalizing violations resulting from clerical errors [12] would do little to achieve this purpose. A certain number of clerical errors are inevitable notwithstanding the maintenance of procedures reasonably adopted to avoid them. Thus violations resulting from such errors will not be prevented by the threat of liability. LaPetina v. Metro Ford Truck Sales, Inc., 648 F.2d 283, 287 (5th Cir. 1981). Excusing a violation caused by an error of law would, however, hinder compliance with the WCA. Errors of law can be prevented, and ordinarily, creditors are in the better position to do so. Their frequent involvement in transactions governed by the WCA gives them an expertise not shared by the average consumer. Further, creditors generally have the resources to obtain legal advice; whereas the cost of legal assistance is often a financial hardship for the consumer. Relatively speaking, the cost of legal assistance may be less for creditors than consumers. Creditors engage in many similar transactions to which the same legal advice may apply. Consumers, on the other hand, only occasionally transact under the WCA. Usually they must obtain legal assistance for each individual transaction. Thus the creditor should bear the responsibility to avoid mistakes of law and resulting WCA violations. Extending the bona fide error defense to errors of law would lessen the incentive for creditors to take precautions which help ensure compliance with the WCA. Furthermore, applying the bona fide error defense to violations resulting from errors of law would weaken enforcement of the WCA by consumers. To fully recover, a consumer would have to prove that the creditor knowingly and intentionally violated the WCA. The proof problems associated with such a requirement would frustrate consumer claims. As stated by one court: If consumers would be required to prove that creditors were determined to violate the Act in order to prevail, the civil remedy would be a hollow one. Buford v. American Finance Company, 333 F. Supp. 1243, 1248 (1971). Private enforcement of consumer protection legislation, such as the WCA, should be facilitated to accomplish the broad remedial purposes intended by the legislature. Dept. of Transportation v. Transportation Comm., 111 Wis. 2d 80, 93, 330 N.W.2d 159 (1983). Finally, there is no need to bring errors of law within the bona fide error defense. The WCA establishes a mechanism through which creditors can protect themselves from liability resulting from good faith errors of law. Sec. 426.104 (4) (b), Stats., [13] allows a creditor to submit in writing to the administrator (Commissioner of Banking) any act, practice, or procedure for a determination of legality. If the administrator gives written approval or fails to disapprove within thirty days, the act, practice, or procedure submitted shall not be deemed a violation of the WCA. Not only is the bona fide error defense unnecessary as to errors of law, its application will impede the benefits of sec. 426.104 (4) (b). Use of this statutory mechanism by creditors is highly desirable because it can prevent legal errors and accompanying WCA violations. If the bona fide error defense is also available, however, there will be less incentive for creditors to wait thirty days for the administrator's determination. [3] In the instant case, the Bank violated the WCA by ordering the Nicolaous' van repossessed without legal process. The Bank mistakenly believed that, since the van was in California, California law rather than the WCA governed the repossession. Thus the violation resulted from an error of law. Having determined that an error of law is not a bona fide error, we conclude that the bona fide error defense is not available to the Bank. Accordingly, the trial court erred in limiting the Bank's liability within sec. 425.301 (3), Stats. The Nicolaous are entitled to recover both the value of the van and the payments made on the sales contract under sec. 425.305.