Opinion ID: 1238683
Heading Depth: 3
Heading Rank: 3

Heading: Defense of Bona Fide Error

Text: The FDCPA provides a bona-fide-error defense which states that: A debt collector may not be held liable in any action brought under this subchapter if the debt collector 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. 15 U.S.C. § 1692k(c). This court recently held that this defense applies to mistakes of law as well as to clerical errors. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 538 F.3d 469, 476 (6th Cir.2008). To qualify for the bona fide error defense, a debt collector must prove by a preponderance of the evidence that: (1) the violation was unintentional; (2) the violation was a result of a bona fide error; and (3) the debt collector maintained procedures reasonably adapted to avoid any such error. Id. at 476-77. In each case, the district court found that even if summary judgment was not proper because of a genuine issue whether the least sophisticated consumer would be confused or misled, Great Seneca and Javitch had established that they were entitled to the BFE defense. The district court based this finding on its conclusion that Great Seneca had no intent to mislead or misrepresent, that Great Seneca has exhaustive procedures in place to verify financial information associated with debts, that Great Seneca hired a law firm to manage its portfolio, and that Javitch relied on Great Seneca's representations and did not believe that calling Exhibit A an account was prohibited by the FDCPA. Contrary to the district court's conclusion, Great Seneca and Javitch have not established that they qualify for the BFE defense. Taking the facts in the light most favorable to Hartman and Rice, we believe that Great Seneca and Javitch have not shown that the violation was unintentional. Indeed, Hartman and Rice assert that Great Seneca and Javitch made Exhibit A look like a credit-card statement in order to avoid Ohio law. Nor have Great Seneca and Javitch shown by a preponderance of the evidence that they maintained procedures intended to avoid the type of error that occurred. The error made by Great Seneca and Javitch was a mistake of law; they represented that Exhibit A was an account in a manner that could be found to be misleading or deceptive. However, Great Seneca's and Javitch's arguments fail to address the procedures that they had in place to avoid this type of error. Before the district court, Great Seneca and Javitch extensively detailed the process of the electronic transfer of debts to show that the amount they alleged was actually the amount owed. Procedures meant to ensure that the amount of a debt is properly verified are not at issue in these cases, as Hartman and Rice do not now dispute the underlying debts. One of Javitch's managing partners stated that he believed that Ohio law permitted the use of a document like Exhibit A in a creditor's claim. This statement suggests that the violation was unintentional, but it does not detail any procedures that Great Seneca or Javitch used to ensure that mistakes of law did not occur. Great Seneca and Javitch presented no evidence that they perform ongoing FDCPA training, procure the most recent case law, or have an individual responsible for continuing compliance with the FDCPA. See Jerman, 538 F.3d at 477. Taking the facts in the light most favorable to Hartman and Rice, we believe that Great Seneca and Javitch have not shown by a preponderance that the violation was unintentional or that they employ procedures meant to avoid mistakes of law that could cause FDCPA violations. Therefore, the district court erred in its conclusion that Great Seneca and Javitch are entitled to dismissal at the summary-judgment stage of this litigation on the ground that they have established the BFE defense. Whether Great Seneca and Javitch can establish the elements of the BFE defense by a preponderance of the evidence is an issue that may be explored further as the litigation proceeds on remand.