Fair Debt Collection Practices Act, the
Bona Fide Error Defense and Legal Judgment Errors
Janet A. Flaccus Professor
could not let Law Notes get published Sixth Circuit case is the one that the Supreme
without mentioning another Supreme Court took. In this case a lawyer in the firm
Court case. This case, Jerman v. filed a foreclosure action and sent a summons
Carlisle, McNellie, Rini, Kramer & Ulrich LPA with the validation notice information in-
et al.,1 examined the bone fide error defense in cluded.4 This is the validation notice that the
the Fair Debt Collection Practices Act (here- debt collector must send to the debtor within
inafter FDCPA). Carlisle came down April 21, five days after the initial communication. The
2010 so it is very new to me. The bona fide statute specifies what must be included in the
error defense is a subject on which I wrote in validation notice. Filing a law suit is not con-
2001.2 If a debt collector violates the Act, the sidered an initial communication because of a
bone fide error defense is the only defense that recent change to the statute.5
can protect them from liability. In that article I The violation of the FDCPA was that the
argued that the bona fide error defense should validation notice said that the debt would
apply to legal judgment errors when the law is be assumed to be valid unless the debtor, in
not clear but not apply when the law is clear. writing, disputed the debt. This debtor ar-
This approach was adopted by the Seventh, gued that this writing requirement was not
Tenth and Sixth circuit courts of appeal.3 The provided in the statute and this was a viola-
1. 130 S. Ct. 1605 (April 21, 2010).
2. Janet Flaccus, Fair Debt Collections Practices Act: Lawyers and the Bona Fide Error Defense, 2001 Ark. L. notes
3. My 2001 law notes article was cited by the Seventh and Tenth Circuits but not the Sixth.
4. Recall that under 15 U.S.C. § 1692g the debtor had a right to contest the debt within a thirty-day time period.
This “validation” notice must be sent to the debtor within five days after the initial communication. This has created
many headaches for debt collectors.
5. 15 U.S.C.A. § 1692g(d) (2010).
ARKANSAS LAW NOTES 2010
tion of the FDCPA. The debtor’s attorney did pute the debt and get certain rights under (a)
send a writing stating that the debt had been (3), and if they want the debt collector to ver-
paid. The law firm contacted the creditor to ify the debt with the creditor, then the debtor
verify the debt, and the creditor then found needed to make this request in writing under
that debt had been paid. The law firm quick- (a)(4). This was an issue that allegedly had
ly withdrew the complaint.6 Section 1692g(3) a Sixth Circuit case on point already saying
tells the debtor that they can dispute all or a there was no violation. The lower court dis-
portion of a debt. Section 1692g(4) says that tinguished this case in ruling there was a vio-
if the debtor notifies the creditor in a writing lation. The law firm apparently did not take
disputing the debt, the attorney is required this issue up on appeal so the Supreme Court
to check with their creditor-client and deter- does not reach this issue either.7 Yet this case
mine whether the debt is owed. Since both provided a legal issue of statutory construc-
sections talk about disputing all or a por- tion about which courts disagreed.
tion of any debt there is an argument that I argued in my 2001 article that if the law
the Carlisle law firm did not violate the stat- is uncertain as it was in this case, the bona
ute. Nonetheless in my validation notice, I fide error exception would protect the lawyer.
would always print the rights of the debtor This is now not the law, at least when the
outlined in the section 1692g notice verbatim. mistaken interpretation is over the language
If the Carlisle law firm had done this, there in the FDCPA. The Court held that the bona
would have been no violation. Their problem fide error protection only applies to clerical
stemmed from the fact that they added (3) and errors or potentially factual errors but not er-
(4) together by saying that the debtor had a rors of law.8 There is only a sliver of hope left
right to dispute all or any portion of a debt in in my argument. The mistake, if it were one,
writing during the thirty-day window. made by the Carlisle law firm was over an
The debtor then sued the law firm for vio- interpretation of the language in the FDCPA.
lating the FDCPA. The lower court focused The Supreme Court specifically says in foot-
its ruling on whether subsections (3) and note 4 that they were not deciding the issue
(4) should be read together. The court held of whether a mistake of law of state or federal
that the subsections must be read separate- law other than the FDCPA was a bona fide
ly. Subsection (3) requires the notice to state error and protected lawyers from liability.9
that the debt will be assumed valid unless Most of the cases discussing the bona fide
the debtor disputes the debt within the next error exception involve attorneys making er-
thirty days. The lower court held this was a rors of law other than the statutory text in
violation because the debtor could orally dis- the FDCPA.10
6. 130 S. Ct. at 1609.
7. Id. at 1610 n. 3.
8. Id. at 1618.
9. Id. at 1610-11 n. 4 (stating “[t]he parties disagree about whether § 1692k(c) applies when a violation results from
a debt collector’s misinterpretation of the legal requirements of state law or federal law, other than the FDPCA ....
Because this case involves only an alleged misinterpretation of the requirements of the FDCPA we need not, and do
not, reach those other questions.”).
10. I discuss these cases throughout my 2001 law notes article supra note 2.
FAIR DEBT COLLECTION PRACTICES ACT
How much of a sliver of hope is this? Take damages, statutory damages and attorney
this one frequently used example. Assume fees. The award of fees is a wholesale change
the lawyer determines after careful research in the American rule that unless changed by
that the law is not clear whether the cli- law or statute each party must pay their own
ent should win a case against the consumer attorney’s fees. Many statutory fee rules are
debtor. A good argument can be made. If discretionary. But the language in section
the lawyer files a suit but the court decides 1692k(3) seems mandatory to me. It says “[a]
the law is other than the lawyer thinks, this ny debt collector . . . is liable for . . . in the
would leave the lawyer liable for violating the case of any successful action to enforce the
FDCPA. The Act says in section 1692e(5) “the foregoing liability, the costs of the action, to-
following conduct is a violation of this sub- gether with a reasonable attorney’s fee as de-
section . . . . The threat to take any action termined by the court.” This makes the rea-
that cannot legally be taken or that is not sonableness of the fee subject to the court’s
intended to be taken.” Arguably by filing the assessment, but the awarding of attorney’s
lawsuit, the lawyer was threatening to take fees seems mandatory to me.
action that it turns out he was not allowed We in Arkansas have a statute that allows
to take. The Court expresses “skepticism” a court to tack on the other person’s attorney’s
that the language in section 1692e(5) would fees as part of the judgment.13 Attorneys have
be read this way.11 Then notes “[b]ut even as- told me that judges do not regularly make
suming the correctness of petitioner’s reading the losing party pay all the attorney fees.
of § 1692e(5), we suggested that the availabil- With fees mandatory under the FDCPA, the
ity of the bona fide error defense meant that Carlisle case could radically change the land-
the prospect of liability for litigating lawyers scape.
was not ‘so absurd’ as to warrant implying Here in the Eighth Circuit perhaps
a categorical exemption unsupported by the the change will not be so noticeable since
statutory text.”12 I do not know, but I wonder the Eighth Circuit established early on in
how many members of the Supreme Court Hulshizer v. Global Credit Serv., Inc.14 that
have actually practiced law. If they have, I the bona fide error defense was limited to
wonder how long ago was such practice. This clerical errors. This case came down at a time
cavalier attitude means that any time an at- when attorneys were not covered by the stat-
torney is representing a creditor and is a debt ute at all. Attorneys became covered by the
collector, if they lose their legal arguments statute, if they are debt collectors, in 1986.
they and their client will be liable for actual This is when Congress took out the exclusion.
11. 130 S. Ct. at 1618-19.
13. arK. coDe ann. § 16-22-308 (2009).
14. 728 F.2d 1037 (8th Cir. 1984).
ARKANSAS LAW NOTES 2010
Of course it was not until Jenkins v. Heinz15 torneys were completely taken out of the
came down in 1995 that it was clear that at- definition of “debt collector” and thus out of
torneys filing a law suit and violating that the statute completely when the statute was
statute in the complaint were covered by the originally passed. The Court relied on the
statute. But the Eighth Circuit has recently three circuit court of appeal decisions look-
said that Hulshizer is still the law in the cir- ing at TILA. The Court says that Congress
cuit in Picht v. Hawks,16 but the court does must have been aware that the courts found
not use the words “clerical error” anywhere the bona fide error defense limited to cleri-
in its discussion of the bona fide error. It does cal errors. Nowhere does the Court address
not, however, say that the Hulshizer case ap- the fact that lawyers were not covered by the
plies to legal errors.17 They note that in the statute and that the TILA does not apply to
Eighth Circuit one panel cannot overrule a lawyers. Once lawyers are brought under the
case by another panel.18 I do not know wheth- statute, the comparison with the TILA loses
er this is an indication that the panel wanted some of its persuasive power. The Court does
to disagree. I would think that at least the not mention this.
court would have wanted to give it more of a Thus, the Court’s opinion must stand on
discussion if it were not so bound. After all, the first part of the opinion where the Court
the Hulshizer case came down in 1984 while says the statute is clear on its face. I think
attorneys were not covered by the statute. this is not persuasive because the statute
Whatever is the meaning of the Picht case, does not mention either clerical or legal er-
the Carlisle case should have less impact rors. But there are only two Justices in dis-
in our circuit than elsewhere. Go just into sent and two concurring opinions.20
Oklahoma and the rule will change as will be The Justices place much weight on the
the case in Tennessee Texas and Louisiana. ability of attorneys to get advisory opinions
It is a surprising part of the Carlisle case from the Federal Trade Commission even
that the Court does not discuss how the though over a ten year time span only seven
FDCPA changed when lawyers were brought requests were made and only four adversary
under its coverage. Central to the Court’s opinions were rendered.21 This is one differ-
decision is the relationship to the bona fide ence between a mistake of law over the statu-
error language in the FDCPA and the Truth tory provisions in the FDCPA and mistakes
and Lending (TILA) statute that was enacted of state or federal law other than the FDCPA.
nine years before.19 There is no discussion in You can ask for an advisory opinion when you
the case about the fact that at the time at- are unsure of language in the FDCPA. You
15. 514 U.S. 291, 115 S. Ct. 1489 (1995).
16. 236 F.3d 446, 451-2.
18. Id. at 452.
19. 130 S. Ct. at 1615-18.
20. Id. at 1608.
21. Id. at 1621.
FAIR DEBT COLLECTION PRACTICES ACT
cannot ask the FTC for an advisory opinion lawyer’s ethical obligation is not to incur li-
about garnishment law of Arkansas. Will this ability, this decision will fundamentally alter
be enough for the Court, sometime in the fu- the practice of law.
ture, to say mistakes of other law are covered The Carlisle decision reads the Heinz
by the bona fide error rule? I do not know. decision as a mere extension. However, the
Certainly, given the Court’s lack of concern Heinz Court suggested that the bona fide er-
about lawyers violating the FDCPA by losing ror rule would protect litigating lawyers as
a case, this suggests that the bona fide error long as they fit within its requirements.23
defense will be limited to clerical and factual The Carlisle Court takes away the bona fide
errors but not legal errors even when the le- error protection. Justice Breyer was the au-
gal error is over law that is not the FDCPA. thor of the Heinz decision. He joins Justice
As is true with other Supreme Court opinions, Sotomayor’s opinion in the Carlisle decision.
this opinion does not give much guidance for This makes it difficult to see where the Court
prediction of what the Court will do when the is going.
attorney makes a mistake of non FDCPA law. You better than I can assess what this de-
In the cases so far on appeal since the Heinz cision will do for the practice of debt collection
case came down, the lawyer is making a mis- that must be hearty in these difficult econom-
take of law other than the FDCPA. How long ic times. Perhaps it will not be much given
will it take to resolve this issue? It will prob- the Eighth Circuit decisions. But those of you
ably take years. who practice in Oklahoma and Tennessee,
Does the Court’s decision create ethical is- Louisiana and Texas will see the changes.
sues? Let’s assume that the lawyer interpret- How much of my 2001 article remains good
ing state or federal law is obligated to pursue law? Only a thread does. I still think that
the legal argument when the law is not clear, lawyers should be protected by the bona fide
which is often the case. This was certainly the error defense by only if the law is not clear
case in my practice. If the lawyer is to do the when the action is taken. After all, the bona
best for her client, does this mean she should fide error defense cannot be raised unless the
pursuit the matter or not pursuit the mat- lawyer can show that the mistake was made
ter? Pursuit of the matter might subject the despite reasonable procedures in place de-
lawyer and her client to damages, statutory signed to avoid such error. For lawyers this
penalties and attorney fees. The court recog- could be adequate research. My 2001 article
nizes that some courts have made the client and the cases it examines finds the bona fide
vicariously liable.22 If the client is not vicari- error defense is allowed only when the law is
ously liable, and only the lawyer is liable this not clear and is not allowed when the law is
would make the lawyer’s interest at variance clear. The Carlisle case covers only mistaken
with the clients interest. Can the lawyer take understandings of what the FDCPA means.
the case with such divergent interest? If the
22. Id. at 1622.
23. Jenkins v. Heinz, 115 U.S. 291, 295, 115 S. Ct. 1489, 1491 (1995).