Appeals Court Affirms Ruling in One Case, Overturns Ruling in Another, Over BFE Defense

The Court of Appeals for the Seventh Circuit affirmed one summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act yesterday while overturning a separate summary judgment ruling, concluding that one defendant was entitled to the FDCPA’s bona fide error defense while the other should not have been entitled to it. The Court — which has issued a number of rulings in the past 14 months limiting the standing that plaintiffs have to sue in FDCPA cases — did rule that the injuries suffered by the plaintiffs, which involved disputes that were not communicated to credit reporting agencies, were concrete enough for them to have standing to sue.

A copy of the ruling in the cases of Ewing v. Med-1 Solutions and Webster v. Receivables Performance Management can be accessed by clicking here.

In both cases, the plaintiffs disputed debts that appeared on their credit reports by notifying the defendants via fax. In Ewing‘s case, the receptionist who monitored the incoming faxes sent the dispute to the wrong department and the dispute was never noted on the plaintiff’s account, while in Webster‘s case, the defendant had stopped monitoring the incoming electronic fax machine months earlier, but had not disconnected it, so the plaintiff’s attorney had received a confirmation that the fax was transmitted successfully. The plaintiffs filed separate lawsuits, and in each case, a District Court judge granted motions for summary judgment from the defendants, each ruling that the defendant’s were entitled to the FDCPA’s bona fide error defense.

The Seventh Circuit upheld the ruling in Ewing, because the defendant policies and procedures in place regarding what needed to happen when a dispute was received via fax, but the receptionist accidentally sent the fax to the wrong department. The plaintiff argued that the defendant needed to have a policy in place for what to do when a fax ended up in the wrong department, but the Seventh Circuit agreed with the District Court judge that “[t]he  absence  of  such a  policy,  however,  does  not  mean  that  MED‐1  failed  to  maintain  reasonably  adapted  procedures.”

 In Webster, however, the defendant was not being reasonable when it decided to stop monitoring the electronic fax inbox while allowing the system to still send confirmations that faxes had been received. The policies and procedures that the defendant had in place were not specific to the type of error that occurred, ruled the three judges on the Seventh Circuit, disagreeing with the District Court judge.

“Receivables’s  unspecified  FDCPA  training  for  employees  and general  policy  of  reporting  disputes  does  not  suffice,” the Appeals Court wrote. “For  regardless  of  these  imprecise  policies,  Receivables  had  no  reasonable  procedure  in  place  to  ensure  that  faxed  disputes  were reported. Nor did Receivables implement any reasonable procedure  to  ensure  that  it  would  no  longer  receive  faxed  disputes  in  the  first  place.” 

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