A federal judge in Utah has ruled that a debt collector may rely on the “bona fide error” defense to defeat a claim for violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. Analyzing the compliance procedures that the debt collector had in place, the Court granted summary judgment for the debt collector in Berry v. Van Ru Credit, Civil Action No. 2:15-cv-150 (D. Utah Sept. 29, 2017).
In August 2014, Douglas Berry defaulted on his student loans, and the United States Department of Education placed the loans with Van Ru Credit for collection. On August 19 of that year, Van Ru sent correspondence to Berry informing him that the Department had referred his loans to Van Ru for collection. Berry also spoke with a Van Ru representative that day, who informed him that the Department had the right to pursue garnishment should the loans remain in default. Furthermore, the representative notified Berry that he could pursue a voluntary rehabilitation program to get his loans out of default. Importantly, the representative did not inform Berry that he worked for Van Ru, instead only mentioning the Department.
On March 6, 2015, Berry filed suit against Van Ru alleging violations of the FDCPA. Along with five other counts relating to representations made during the phone call, Berry alleged that Van Ru’s failure to disclose the caller’s identity violated the Act. Both parties filed for summary judgment.
On September 11, 2017, Magistrate Judge Paul Warner issued a Report and Recommendation in which he recommended summary judgment in favor of Van Ru on all claims. On September 29, the District Court adopted the Report and Recommendation.
The Court’s Decision
For debt collectors, the most important part of the Court’s analysis comes from the examination of Berry’s claim that Van Ru violated the FDCPA by placing telephone calls without meaningful disclosure. The Court disposed of the other claims by examining the transcripts of the calls between Van Ru and Berry, and correspondence between the two parties.
Section 1692k(c) of the Act provides that a debt collector may not be held liable if it can show that a violation “was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such procedures.” According to the Court, Van Ru could find shelter in this provision.
The Court ruled that Van Ru had in fact violated the FDCPA when the representative failed to identify themselves on the initial call. However, that did not necessarily result in liability. First, the Court analyzed the compliance procedures that Van Ru had in place to prevent such a violation. Specifically, the Court examined the written policies and procedures requiring the representative to disclose his or her identity and the fact that he or she was calling from Van Ru on behalf of a certain client. The policies also prohibited the representative from making any false or misleading statements.
Next, the Court found that Van Ru’s extensive training supported its defense. Van Ru provides representatives with an initial three-week training program regarding procedures for telephone calls with consumers. The first two weeks occur in the classroom, culminating with an exam on the FDCPA that new hires must pass. Van Ru conducts refresher training and periodic workshops. Additionally, every January and July, representatives undergo retraining and must pass a new examination. Failing this exam three times results in termination. Likewise, representatives who violate Van Ru’s policies are subject to disciplinary action.
Van Ru carried its burden of establishing bona fide error through the “specific and extensive procedures” that it has in place to avoid the representative’s mistake. A debt collector must maintain—i.e., actually employ or implement—the procedures to take advantage of the defense. Van Ru’s in-depth training and the consequences that it imposed on its representatives for failing to comply with the procedures exhibited that it maintained procedures reasonably designed to avoid such errors. Therefore, the Court granted summary judgment in its favor.
This case demonstrates the importance of creating and actually implementing strong compliance procedures. Had Van Ru merely paid lip service to FDCPA compliance procedures, the Court likely would not have afforded it the bona fide error defense. However, despite the statutory violation, Van Ru escaped liability because it could demonstrate that it had implemented meaningful procedures and extensive training.