(BREAKING NEWS) — The author of this post is a paralegal and consultant to attorneys regarding real property, foreclosure and consumer issues. The concepts contained within this post are for educational and research purposes only and should not be construed as legal advice. In the event one should find this material useful, it is highly recommended that one consult with an attorney who is not only well versed in these matters, but with an attorney who has a winning track record on debt collection issues, like the cases discussed herein.
Every so often, a debt collection case comes across my desk that contains multiple plaintiffs and thus warrants attention, especially because the federal appellate circuit reversed and remanded the cases back to the district courts from whence they came because the panel agreed that the federal district court erred in its 16-page ruling on particular facets of the cases in chief.
This particular case centers around what is termed “bona fide error” caused by the debt collector and/or its attorney(s). See the case below:
In this particular case, both Plaintiffs decisions were rendered by judges within the same division of the same district … the Southern District of Indiana, Indianapolis Division (including the Chief Judge). The cases were merged because of their similarities in arguments. Both cases were argued before the 7th Appellate Circuit Court of Appeals on December 14, 2021 and the ruling was issued on February 2, 2022. The backgrounds in each case are pretty self-explanatory.
In Ewing’s case, it took the debt collector two years to acknowledge that the alleged debtor disputed the debt collection claim. When Ewing looked at her credit report and saw the alleged debt was misrepresented, she decided that the misrepresentation of the debt under 15 U.S.C. ยง 1692e(8) was violated by the debt collector and filed suit. In Ewing’s case, as typical, the federal district judge ruled for the debt collector, who claimed that the error was unintentional, thus invoking the bona fide error as its affirmative defense.
In Webster’s case, she discovered an error on her credit report she did not believed she owed. Through counsel, a dispute notice was faxed to the debt collector. However, the dispute notice was faxed to a number the attorney thought was a viable fax number, which turned out not to be the case because the debt collector, on its own volition, decided to remove the fax number from its website and stopped checking its inbox for new disputes. Webster sued because the debt collector misrepresented the fact her account was in dispute, which in turn harmed her credit score. The debt collector of course, claimed it was excused from 15 U.S.C. 1692k(c) because of a bone fide error as its affirmative defense.
Both cases involved negative reporting by each debt collector on the consumer’s credit bureau reports, which was part of the issue discussed in both cases because each had a “published injury” (misrepresentation of the actual facts of the matter).
Significantly, both debt collectors raised a “standing issue” argument. Both claimed there was not sufficient enough of a “concrete injury in fact” (as outlined within the U.S Supreme Court) and alleged there was no case or controversy for the court to rule on.
The appellate court discussed the issue of what constitutes “a concrete injury”, bringing to bear several U.S. Supreme Court issues, including Spokeo, Inc. v. Robins, which this author brought forward to some degree in his FDCPA book (see the website for details by clicking this link). While the nation’s highest court generally rules within very narrow margins, the discussions within this case are quite lengthy in explaining the various “harms” and whether they constitute an injury in fact, a requirement for any federally-based debt collection action, whether tangible or intangible.
The cases then turned on the key issue here of “bona fide defense”, citing multiple cases, including the infamous Jerman v. Carlisle case (cited within). As the cases drew to their conclusions, the appellate court determined that the errors in both instances could have been avoided if reasonable procedures had been in place and thus disclosed and identified by the parties as reasonable. Such was not the case in either instance according to what this paralegal read (see Pages 15 and 16 of the ruling for the double whammy on both debt collectors).
And this is why we have appellate courts (because the district courts have a propensity to misinterpret the law as it is written, in this case, the Fair Debt Collection Practices Act. What most folks don’t realize when initiating these suits, are the following takeaways:
- A person filing an FDCPA suit has to have a legitimate “injury-in-fact”, whether tangible or intangible, that can easily be interpreted by the court;
- The injury-in-fact must be “concrete, particularized and actual or imminent” in order to stick;
- When examining case law, especially regarding the FDCPA, understand that these suits are normally brought in U.S. District Court in the district in which the Plaintiff resides because cases in controversy (many times) cross state lines;
- That an attorney bringing these claims needs to fully understand the principles discussed within the cited cases in this instance, which is why this author decided to bring this case forward for further discussion;
- There was no evidence that any state-based claims were brought forward in either instance, because the Plaintiffs’ attorneys knew that the debt collectors were out of state; thus, both claims were federal matters; and
- As noted in cases like Jerman, this author constantly sees the application of the bona fide error defense used affirmatively by debt collectors whenever possible because of the narrow ruling by the U.S. Supreme Court “walks a fine line” in the district courts, where district and circuit judges (like those judges in foreclosure cases) in most instances, rule on behalf of the defendant debt collector (bank, alleged lender) a majority of the time, which requires an appeal.
Despite the fact appeals can be costly, they are more effective in setting good case law, which is why this author chose to post THIS case to enhance one’s “learning curve” when it comes to understanding and recognizing when one has a case versus when one doesn’t.
As a footnote, one should be prepared to litigate this case to its final conclusion; thus, cases like this, which can turn on a dime, are not for the faint of heart and those without the budget to do so.
Listen to Dave Krieger on The Power Hour, Monday-Friday from 11:00 a.m – 1:00 p.m. Central Time.
Clouded Titles Blog 