Banking and Finance Law Daily Consumer’s back pain becomes debt collector’s misery
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Wednesday, July 5, 2017

Consumer’s back pain becomes debt collector’s misery

By Richard A. Roth, J.D.

A debt collector trying to collect a $25 bill for medical services is liable for tens of thousands of dollars in damages for violating the Fair Debt Collection Practices Act and the Telephone Consumer Practices Act. According to the U.S. Court of Appeals for the Third Circuit, the consumer did not consent to automated collection calls on his cell phone, and the debt collector could not rely on the bona fide error defense to the FDCPA claims. A $34,500 damage award under the TCPA was affirmed, a judgment against the FDCPA claim was reversed, and the district court judge was instructed to calculate the damages due under the debt collection act (Daubert v. NRA Group, LLC, July 3, 2017, Fisher, D.).

According to the court, the consumer owed $25 for x-rays of his back after his insurance company paid its part of the bill. When he did not pay his share, the service provider’s billing company referred the account to a debt collector that used the name National Recovery Agency. NRA used two collection tactics: it sent a dunning letter and made telephone calls to the consumer’s cell phone.

The consumer claimed that each tactic violated federal law. The dunning letter violated the FDCPA because it was in an envelope with windows that displayed NRA’s account number and a bar code that, when deciphered, revealed that number. The 69 telephone calls made using an automatic dialer violated the TCPA because he had never consented to telephone calls, the consumer claimed.

Trial court decisions. The district court judge gave the consumer a pretrial judgment on his TCPA claim, deciding that there was no genuine dispute that he had not consented to the autodialed calls. However, at trial the judge took the FDCPA claim away from the jury, ruling that revealing the account number was a bona fide error for which the debt collector was not liable.

TCPA claim. The appellate court agreed that summary judgement in favor of the TCPA claim was appropriate. The TCPA prohibits anyone from using an autodialing system to make telephone calls to a consumer’s cell phone without the consumer’s prior express consent (47 U.S.C. §227(b)). NRA asserted both that an autodialer had not been used and that the consumer had consented, but it lost both arguments.

A deposition by a company representative foreclosed the autodialer dispute, the court said. The employee designated by the company to give a deposition on its telephone collection practices testified that the collection calls were made with no human intervention until a call as answered, and a subsequent contrary affidavit by another employee was properly disregarded under the "sham-affidavit doctrine."

The debt collector had not provided any evidence that the consumer had consented to the calls, the court also said. It was true that such consent could be given indirectly, i.e. the TCPA would have been satisfied if the consumer had consented to billing-related calls from the x-ray service provider. However, NRA was required to provide direct evidence of that consent, and it had not done so. It was possible that such consent was included in the forms the consumer signed when the x-rays were performed, the court conceded, but those forms were not in evidence.

FDCPA claim. The district court judge incorrectly determined that displaying the account number was a bona fide error, the appellate court continued. If there was an error, it was an error in interpreting the FDCPA, and an interpretation error cannot be a bona fide error under the statute.

Whether allowing the bar code to be visible violated the FDCPA was, in fact, unsettled, the court noted. However, NRA did not challenge the conclusion that it had violated the act. The company relied solely on a claim that its violation was a bona fide error—an unintentional mistake that happened even though the debt collector maintained procedures reasonably created to prevent the mistake.

According to the court, the Supreme Court has made clear that an erroneous interpretation of the FDCPA cannot be a bona fide error (Jerman v. Carlisle, McNellie, Rini & Ulrich LPA, 559 U.S. 573 (2010)). Only a clerical or factual error can be a bona fide error; relying on district court opinions, as NRA did, cannot.

The case is No. 16-3613 and No. 13-3629.

Attorneys: Brett M. Freeman (Sabatini Law Firm) for John Daubert. Richard J. Perr (Fineman Krekstein & Harris) for NRA Group, LLC.

Companies: NRA Group, LLC, d/b/a National Recovery Agency

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