The Ninth Circuit Court of Appeals has granted a request for publication and replaced a memorandum of disposition with an opinion, updating the reversal of a lower court’s summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act by relying on information it was provided by the original creditor, saying the defendant was not entitled to the FDCPA’s bona fide error defense.
A copy of the opinion in the case of Urbina v. National Business Factors can be accessed by clicking here.
The plaintiff incurred a medical debt to a healthcare provider. Part of the debt was paid by the plaintiff’s insurance carrier and the plaintiff made a series of payments on the debt as well, the last one being in August 2016. The plaintiff received a statement in September 2016 that she had a balance of $614.52. The plaintiff made no further payments on the debt and it was referred to the defendant for collections. The defendant sent a collection letter to the plaintiff, seeking to collect $614.52 plus $29.07 in interest.
The plaintiff filed suit, and moved for summary judgment. In opposing the motion, the defendant admitted it received an incorrect payment history from the original creditor and had miscalculated the interest owed by the plaintiff. A District Court judge ruled that the defendant had violated the FDCPA, but was entitled to the bona fide error defense because of the information it was provided, and granted summary judgment in favor of the defendant.
The defendant’s contract with the original creditor required the creditor to send “only accurate data and that the balances reflect legitimate, enforceable obligations of the consumer.” But the Appeals Court said that a collection agency can not wait for a creditor to make a mistake and then institute policies and procedures to prevent a recurrence; instead collectors bear an affirmative obligation to avoid discoverable errors.
The defendant attempted to argue that beyond the language in the contract, it separately follow-up requests seeking verification of the accuracy of the information. This was “closer to the mark” of being entitled to the bona fide error defense, the Appeals Court ruled, but still fell short because the defendant didn’t wait for a response from the client before commencing collection activities.
“Because NBF does not argue that it routinely waits for creditor-clients to respond before sending collection notices to debtors, NBF fails to show that its practice of requesting account verification from its clients is genuinely calculated to catch errors of the sort that occurred here,” the Appeals Court wrote. “Neither of NBF’s practices qualifies for the bona fide error defense.”
