Banking and Finance Law Daily Debt collector not entitled to bona fide error defense for communications to wrong individual
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Tuesday, September 8, 2020

Debt collector not entitled to bona fide error defense for communications to wrong individual

By Nicole D. Prysby, J.D.

A debt collection firm was not entitled to the bona fide error defense against some FDCPA claims, because it did not maintain procedures to avoid erroneously sending communications to an individual with the same name as the debtor.

A debt collection firm was not was entitled to the bona fide error defense against some claims that it violated the Fair Debt Collection Practices Act (FDCPA) when it attempted to collect a debt from a consumer with a similar name as the debtor’s, held the Second Circuit Court of Appeals. The debt collection firm believed that the two men were related (though they were not) and that at some point, the debtor had lived at the consumer’s address, and it sent multiple debt collection communications to the consumer’s address. The debt collector did not violate 15 U.S.C. section 1692e(5), because it sought to collect on a valid judgment against the debtor and it did not intend to send the debt collection communications to a non-debtor. Nor did it violate section 1692f, because the consumer was never forced to respond to the communications or attend a debtor’s conference. However, the debt collector failed to establish that it was entitled to the bona fide error defense, because a reasonable jury could find that the error was not bona fide and that it did not maintain procedures reasonably adapted to avoid its error. The debt collector knew that the social security numbers of the two individuals did not match and that they had different birth years. It was in possession of enough evidence that the consumer was neither the debtor nor the debtor’s father to permit a reasonable jury to conclude that its mistake, even if honestly made, was not made in good faith. Therefore, the debt collector was not entitled to summary judgment on the remaining FDCPA claims (Wagner v. Chiari & Ilecki, LLP, Sept. 4, 2020, Pooler, R.).

Background. A debt collection firm, Chiari & Ilecki, LLP (C&I), attempted to find the debtor to collect on a state court judgment and identified an address which it thought was the most likely. However, the debtor did not live at that address—it was owned and inhabited by an unrelated individual (the consumer) with the same first name, last name, and middle initial. However, the debtor used a "Jr." suffix while the consumer did not. The debt collection firm began sending debt collection notices to the consumer. The consumer contacted the debt collection firm and explained that he was not the individual in question, and provided the final two digits of his social security number (which did not match the digits on file for the debtor). C&I sent additional documents (an information subpoena, restraining notice, and subpoena duces tecum) to the consumer, after taking steps that it believed confirmed the address. The consumer filed suit, claiming that C&I’s debt collection communications violated various provisions of the FDCPA. The district court held that C&I had not violated sections 1692e(5), 1692(f), or 1692f(1). The court further held that C&I had violated sections 1692e, 1692e(2)(A), and 1692e(10), by serving the consumer with the subpoena duces tecum after the consumer had twice informed them that he was not the debtor. Finally, concluding that the FDCPA’s bona fide error defense applied to shield C&I from liability for its violations, the district court entered judgment for C&I. The consumer appealed.

FDCPA claims. C&I’s conduct did not violate section 1692e. C&I sought to collect on a valid judgment against the debtor and the record establishes that it did not intend to send the debt collection communications to a non-debtor. Nor did C&I violate section 1692f. The consumer was never forced to attend a debtor’s examination or to respond to the information subpoena and C&I ultimately agreed to hold the subpoena duces tecum—which incorporated the restraining notice—in abeyance. While a debt collector’s bad faith to collect on a judgment from a non-debtor might constitute an "unfair or unconscionable" means of debt collection, the record does not establish such conduct here.

However, C&I failed to establish that it was entitled to the bona fide error defense. While no reasonable jury could find that C&I intentionally sent the subpoena duces tecum to a non-debtor, a reasonable jury could find that C&I’s error was not bona fide and that it did not maintain procedures reasonably adapted to avoid its error. C&I was in possession of enough evidence that the consumer was neither the debtor nor the debtor’s father to permit a reasonable jury to conclude that C&I’s mistake was not made in good faith. A reasonable jury could also conclude that C&I did not maintain procedures reasonably adapted to avoid its error. C&I conceded that it had no written policies for situations in which employees of C&I believe that a debtor may live at a particular residence, but are not certain; C&I has information about the location of a person with a name similar to a debtor’s; or a non-debtor with a name similar to a debtor informs C&I that they are not the debtor C&I sought to contact. Therefore, C&I was not entitled to summary judgment on the remaining FDCPA claims.

The case is No. 19-15169.

Attorneys: Brian Lewis Bromberg (Bromberg Law Office, PC) for William J. Wagner. Terrence M. Connors (Connors LLP) for Chiari & Ilecki LLP.

Companies: Chiari & Ilecki LLP

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