Bona Fide Error Defense Requires Bona Fide Procedures, Ninth Circuit Holds

The Ninth Circuit today upheld summary judgment for a debtor against a debt collection agency under the Fair Debt Collection Practices Act.  The agency had purported to verify to the debtor that he owed, in addition to an amount due under a residential lease, a $225 fee for the landlord's cost of having a lawyer write a demand letter.  But the lease allowed recovery of such a fee only if the landlord sued.  Oops.

The debt collector invoked the bona fide error defense under section 1692k(c) of the FDCPA.  It asserted, in a declaration, that the landlord had always given it accurate information in the past and that it therefore reasonably relied on the false information about the landlord's entitlement to tack on the fee. 

The Ninth Circuit rejected the defense.  It noted that the statute requires proof that "the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error."  Reliance on a creditor to get the numbers right doesn't raise a fact issue that the agency maintained "procedures reasonably adapted to avoid" a mistake in the creditor's representations.  "The procedures themselves must be explained, along with the manner in which they were adapted to avoid the error."  Reichert v. Nat'l Credit Systems, Inc., No. 06-15503, slip op. at 8 (9th Cir. July 7, 2008).