Supremes Reverse Lower Courts; Say Attorney Screw-Up When Pursuing Foreclosure Action Is Indefensible As "Bona Fide Error" Under FDCPA

In Washington, D.C., Courthouse News Service reports:

• Attorneys cannot hide behind an honest mistake should they violate federal debt-collection laws when chasing down debt, the Supreme Court ruled Tuesday. The ruling comes after the law firm of Carlisle, McNellie, Rini, Kramer & Ulrich filed suit in Ohio state court in 2006 on behalf of Countrywide Home Loans to foreclose on the mortgage for property owned by Karen Jerman. The lawsuit included a notice that the mortgage debt would be assumed valid unless Jerman disputed it in writing. Jerman's attorney sent a letter disputing the debt, and Countrywide confirmed that the debt had been paid in full.

• The law firm withdrew its foreclosure lawsuit. Jerman fired back with a lawsuit, seeking class certification and damages for violating the Fair Debt Collection Practices Act. She contended that the firm broke the law by stating that her debt would be assumed valid unless she disputed it in writing.(1) The district court found that the woman's rights had been violated, but concluded that the law firm was shielded from liability because the violation was not intentional and "resulted from a bona fide error. The 6th Circuit found that the fair-debt law extends to "mistakes of the law."

• In writing the decision, Justice Sonia Sotomayor said the court declines "to adopt the expansive reading" of the law. "We have long recognized the 'common maximum, familiar to all minds, that ignorance of the law will not excuse any persons, either civilly or criminally.'"

For the story, see Ignorance Still No Defense, Court Says.

See also, The Wall Street Journal: Debt Collectors Can Face Lawsuits for Mistakes, Court Says.

For the ruling, see Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, 08-1200 (April 21, 2010).

For earlier post, and links to all the briefs, see Supremes To Decide Whether Attorney Screw-Up When Pursuing Foreclosure Action Is Defensible As "Bona Fide Error" Under FDCPA.

(1) The consumer alleged the defendant violated the FDCPA because it compelled consumers to dispute the debt in writing when the FDCPA imposes no such requirement. See 15 USC 1692g(a)(3). The FDCPA states simply that if the consumer dipsutes the debt in writing, such written dispute operates to impose certain legal obligations on the creditor. See 15 USC 1692g(a)(4),(5); 15 USC 1692(g)(b). The consumer is always free to dispute the debt orally. Such oral dispute, however, will not impose those legal obligations on the creditor that a written dispute imposes.