The US Supreme Court, in overturning decisions at both the district and appellate levels, has determined that a law firm cannot benefit from the bona fide error defense within the Fair Debt Collection Practices Act (FDCPA) when the error was caused by a mistaken interpretation of the FDCPA's legal requirements. The majority's decision was written by Justice Sonia Sotomayor, with Justices Stephen Breyer and Antonin Scalia providing separate concurring opinions. Justices Anthony Kennedy and Samuel Alito dissented. Interestingly, the dissent opines that the majority is rejecting "a straightforward, quite reasonable interpretation of the statute's plain terms" and believes that the law will now be used to punish mistakes made in good faith.
What was the error? In its validation notice, the law firm, which specialized in real estate and foreclosures, specified that the debt would be assumed valid unless the debtor disputed the debt in writing (emphasis added). The FDCPA does not require a debtor to dispute a debt in writing.
The relevant provision of the FDCPA states:
809. Validation of debts
a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
The law firm admitted that its validation notice was intended to require the dispute to be in writing and that it did not know that the FDCPA did not require a written dispute. The firm argued that it should not be held liable because the error was unintentional or bona fide and should be afforded the safe harbor protection under the FDCPA.
The lower court found that there had been a violation of the FDCPA, but that the firm should not liable for damages because of the bona fide mistake. The appellate court affirmed that decision.
The case was remanded for a damages determination.