Debt collectors, specifically including lawyers, are liable for any error of law committed by them as part of the debt collection process, even if the error was innocent and in good faith. So the Supreme Court has just ruled, in a 7-2 decision interpreting the Federal Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. That statute establishes sanctions against “debt collectors” for prohibited debt collection practices, but provides an out: no liability will be assessed for “bona fide errors notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” Similar language is salted throughout the FDCPA. The newest development resolves a conflict among Circuits, and holds that the “out” only applies to clerical errors, and not errors of law, even those made in good faith.
Available sanctions include damages which, in a class action, could be the lesser of $500,000 or 1 per cent of the net worth of the debt collector, as well as legal costs and actual damages. §1692(a)(2).
The statute also provides that no liability will attach for “any act done or omitted in good faith in conformity with any advisory opinion of the Federal Trade Commission.” Both the majority and the dissent agreed that requests for FTC opinions have been rare, and that waiting for such an opinion, even if the FTC would be able or willing to answer the flood of inquiries that could theoretically ensue, is impractical.
The lesson? Lawyers and their clients should re-review each stage of the debt collection process for legal compliance. In this case, the error was a lawyer’s advising a debtor that she had to dispute a mortgage debt in writing, when no requirement for a “writing” was contained in the FDCPA. To read the Supreme Court’s entire decision, click here. [Jerman v. Carlisle, Docket No. 08-1200 (April 21, 2010).]
