The Court of Appeals for the Seventh Circuit has upheld a lower court’s summary judgment in favor of a defendant that was sued for allegedly violating the Fair Debt Collection Practices Act by improperly attempting to collect on a time-barred debt because the defendant properly applied the FDCPA’s bona fide error defense.
A copy of the ruling in Abdollahzadeh v. Mandarich Law Group, LLP, can be accessed by clicking here.
The plaintiff defaulted on a credit card debt, having made his last payment in August 2010. The debt was charged off, but the plaintiff made a payment in June 2011, which did not clear. The debt was sold and placed with the defendant for collection. When the account was sold, for some unknown reason, the uncleared payment was listed as the date of last payment, and not the actual last payment, which was made nearly a year earlier.
The defendant sent the plaintiff a collection letter, which went unanswered. The defendant then initiated a collection lawsuit. The suit was ultimately dismissed because the five-year statute of limitations in Illinois had expired, based on the date of the actual last payment.
The plaintiff then filed suit against the defendant, alleging a violation of Section 1692e and 1692f the FDCPA by sending a misleading collection letter and suing to collecting a time-barred debt. A District Court judge granted summary judgment for the defendant, ruling that any violation was an unintentional result of a bona fide error. The plaintiff appealed that decision.
In affirming the result, the Seventh Circuit determined that the defendant “reasonable precautions to prevent attempts to collect time-barred debts,” and thus was entitled to the bona fide error defense. Because the bona fide error defense only requires collectors to take “reasonable precaution” to avoid errors, and looking at the steps the defendant took to ensure that the debt was not time-barred — relying on account information provided by the client, subjecting it to an automated scrub that culled out-of-statute debts, relying on the client’s attestation that the information in its report was correct, and having an attorney examine the account to check whether a collection action would fall outside the applicable limitations period — was sufficiently reasonable, the Appeals Court determined.