The Fair Debt Collection Practices Act (FDCPA or Act) imposes civil liability on debt collector[s] for certain

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The Fair Debt Collection Practices Act (FDCPA or Act) imposes civil liability on ‘‘debt collector[s]’’ for certain prohibited debt collection practices. Section 813(c) of the Act, [citation], provides that a debt collector is not liable in an action brought under the Act if she can show ‘‘the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.’’ * * * 

 I

   Congress enacted the FDCPA in 1977, [citation], to eliminate abusive debt collection practices, to ensure that debt collectors who abstain from such practices are not competitively disadvantaged, and to promote consistent state action to protect consumers. [Citation.] The Act regulates interactions between consumer debtors and ‘‘debt collector[s],’’ defined to include any person who ‘‘regularly collects … debts owed or due or asserted to be owed or due another.’’ [Citation]. Among other things, the Act prohibits debt collectors from making false representations as to a debt’s character, amount, or legal status, [citation]; communicating with consumers at an ‘‘unusual time or place’’ likely to be inconvenient to the consumer, [citation]; or using obscene or profane language or violence or the threat thereof. [Citations.] 

   The Act is enforced through administrative action and private lawsuits. With some exceptions not relevant here, violations of the FDCPA are deemed to be unfair or deceptive acts or practices under the Federal Trade Commission Act (FTC Act), [citation], and are enforced by the Federal Trade Commission (FTC). [Citation.] As a result, a debt collector who acts with ‘‘actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is [prohibited under the FDCPA]’’ is subject to civil penalties of up to $16,000 per day. [Citation.]

   The FDCPA also provides that ‘‘any debt collector who fails to comply with any provision of th[e] [Act] with respect to any person is liable to such person.’’ [Citation.] Successful plaintiffs are entitled to ‘‘actual damage[s],’’ plus costs and ‘‘a reasonable attorney’s fee as determined by the court.’’ [Citation.] A court may also award ‘‘additional damages,’’ subject to a statutory cap of $1,000 for individual actions, or, for class actions, ‘‘the lesser of $500,000 or 1 per centum of the net worth of the debt collector.’’ [Citation.] In awarding additional damages, the court must consider ‘‘the frequency and persistence of [the debt collector’s] noncompliance,’’ ‘‘the nature of such noncompliance,’’ and ‘‘the extent to which such noncompliance was intentional.’’ [Citation.]  

   The Act contains two exceptions to provisions imposing liability on debt collectors. Section 1692k(c), at issue here, provides that

[a] debt collector may not be held liable in any action brought under [the FDCPA] if the debt collector shows by a preponderance of evidence 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.  

   The Act also states that none of its provisions imposing liability shall apply to ‘‘any act done or omitted in good faith in conformity with any advisory opinion of the [Federal Trade] Commission.’’ [Citation.]

B

   Respondents in this case are a law firm, Carlisle, McNellie, Rini, Kramer & Ulrich, L. P. A., and one of its attorneys, Adrienne S. Foster (collectively Carlisle). In April 2006, Carlisle filed a complaint in Ohio state court on behalf of a client, Countrywide Home Loans, Inc. Carlisle sought foreclosure of a mortgage held by Countrywide in real property owned by petitioner Karen L. Jerman. The complaint included a ‘‘Notice,’’ later served on Jerman, stating that the mortgage debt would be assumed to be valid unless Jerman disputed it in writing. Jerman’s lawyer sent a letter disputing the debt, and Carlisle sought verification from Countrywide. When Countrywide acknowledged that Jerman had, in fact, already paid the debt in full, Carlisle withdrew the foreclosure lawsuit. Jerman then filed her own lawsuit seeking class certification and damages under the FDCPA, contending that Carlisle violated §1692g by stating that her debt would be assumed valid unless she disputed it in writing. While acknowledging a division of authority on the question, the District Court held that Carlisle had violated §1692g by requiring Jerman to dispute the debt in writing. [Citation.] The court ultimately granted summary judgment to Carlisle, however, concluding that §1692k(c) shielded it from liability because the violation was not intentional, resulted from a bona fide error, and occurred despite the maintenance of procedures reasonably adapted to avoid any such error. [Citation.] The Court of Appeals for the Sixth Circuit affirmed. * * *, the court observed that Congress has amended the FDCPA several times since 1977 without excluding mistakes of law from §1692k(c). [Citation.]

   We granted certiorari * * *. 

II

   The parties disagree about whether a ‘‘violation’’ resulting from a debt collector’s misinterpretation of the legal requirements of the FDCPA can ever be ‘‘not intentional’’ under §1692k(c). Jerman contends that when a debt collector intentionally commits the act giving rise to the violation (here, sending a notice that included the ‘‘in writing’’ language), a misunderstanding about what the Act requires cannot render the violation ‘‘not intentional,’’ given the general rule that mistake or ignorance of law is no defense. Carlisle * * *, in contrast, argue that nothing in the statutory text excludes legal errors from the category of ‘‘bona fide error[s]’’ covered by §1692k(c) and note that the Act refers not to an unintentional ‘‘act’’ but rather an unintentional ‘‘violation.’’ The latter term, they contend, evinces Congress’ intent to impose liability only when a party knows its conduct is unlawful. Carlisle urges us, therefore, to read §1692k(c) to encompass ‘‘all types of error,’’ including mistakes of law. [Citation.]

   We decline to adopt the expansive reading of §1692k(c) that Carlisle proposes. We have long recognized the ‘‘common maxim, familiar to all minds, that ignorance of the law will not excuse any person, either civilly or criminally.’’ [Citations.]

*** 

   We draw additional support for the conclusion that bona fide errors in §1692k(c) do not include mistaken interpretations of the FDCPA, from the requirement that a debt collector maintain ‘‘procedures reasonably adapted to avoid any such error.’’ * * * In that light, the statutory phrase is more naturally read to apply to processes that have mechanical or other such ‘‘regular orderly’’ steps to avoid mistakes—for instance, the kind of internal controls a debt collector might adopt to ensure its employees do not communicate with consumers at the wrong time of day, §1692c(a)(1), or make false representations as to the amount of a debt, §1692e(2). * * * But legal reasoning is not a mechanical or strictly linear process. For this reason, we find force in the suggestion by the Government (as amicus curiae supporting Jerman) that the broad statutory requirement of procedures reasonably designed to avoid ‘‘any’’ bona fide error indicates that the relevant procedures are ones that help to avoid errors like clerical or factual mistakes. Such procedures are more likely to avoid error than those applicable to legal reasoning, particularly in the context of a comprehensive and complex federal statute such as the FDCPA that imposes open ended prohibitions on, inter alia, ‘‘false, deceptive,’’ §1692e, or ‘‘unfair’’ practices, §1692f. Even if the text of §1692k(c), read in isolation, leaves room for doubt, the context and history of the FDCPA provide further reinforcement for construing that provision not to shield violations resulting from misinterpretations of the requirements of the Act. [Citation.] In our view, the Court of Appeals’ reading is at odds with the role Congress evidently contemplated for the FTC in resolving ambiguities in the Act. Debt collectors would rarely need to consult the FTC if §1692k(c) were read to offer immunity for good-faith reliance on advice from private counsel. Indeed, debt collectors might have an affirmative incentive not to seek an advisory opinion to resolve ambiguity in the law, as receipt of such advice would prevent them from claiming good-faith immunity for violations and would potentially trigger civil penalties for knowing violations under the FTC Act. More importantly, the existence of a separate provision that, by its plain terms, is more obviously tailored to the concern at issue (excusing civil liability when the Act’s prohibitions are uncertain) weighs against stretching the language of the bona fide error defense to accommodate Carlisle’s expansive reading.

*** 

 B

   Carlisle, its amici, and the dissent raise the additional concern that our reading will have unworkable practical consequences for debt collecting lawyers. [Citations.] Carlisle claims the FDCPA’s private enforcement provisions have fostered a ‘‘cottage industry’’ of professional plaintiffs who sue debt collectors for trivial violations of the Act. [Citation.] If debt collecting attorneys can be held personally liable for their reasonable misinterpretations of the requirements of the Act, Carlisle and its amici foresee a flood of lawsuits against creditors’ lawyers by plaintiffs (and their attorneys) seeking damages and attorney’s fees. The threat of such liability, in the dissent’s view, creates an irreconcilable conflict between an attorney’s personal financial interest and her ethical obligation of zealous advocacy on behalf of a client: An attorney uncertain about what the FDCPA requires must choose between, on the one hand, exposing herself to liability and, on the other, resolving the legal ambiguity against her client’s interest or advising the client to settle—even where there is substantial legal authority for a position favoring the client. [Citation.] 

   We do not believe our holding today portends such grave consequences. For one, the FDCPA contains several provisions that expressly guard against abusive lawsuits, thereby mitigating the financial risk to creditors’ attorneys. When an alleged violation is trivial, the ‘‘actual damage[s]’’ sustained, §1692k(a)(1), will likely be de minimis or even zero. The Act sets a cap on ‘‘additional’’ damages, §1692k(a)(2), and vests courts with discretion to adjust such damages where a violation is based on a good faith error, §1692k(b). * * *

*** 

   To the extent the FDCPA imposes some constraints on a lawyer’s advocacy on behalf of a client, it is hardly unique in our law. * * *

   For the reasons discussed above, the judgment of the United States Court of Appeals for the Sixth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

   It is so ordered. 

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Smith and Roberson Business Law

ISBN: 978-0538473637

15th Edition

Authors: Richard A. Mann, Barry S. Roberts

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