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New Supreme Court decision will not allow debt collectors to use mistakes in interpretations of law to defend themselves in litigation.

On April 21, 2010, the United States Supreme Court handed down a ruling that dramatically complicates the bona fide error defense used by many debt collection companies involved in lawsuits.

Debt collectors now can be liable under the Fair Debt Collection Practices Act for even a reasonable mistake of law as a result of this decision in the case of Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, LPA.

The Supreme Court determined that lawfirms could no longer use misinterpretations of the law in a bona fide error defense under the FDCPA.

In an opinion written for the majority, the Court determined that “ignorance of the law will not excuse any person, either civilly or criminally.”

Defendants often allege the bona fide error defense under the FDCPA when defending against a lawsuit brought on by a consumer.

The FDCPA bona fide error defense (15 U.S.C. §1692k(c)) provides:

“A debt collector may not be held liable in any action brought under this subchapter 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”.

In a 7-2 ruling, the Supreme Court said that debt collectors could no longer use misinterpretations of the law as a bona fide error defense in civil lawsuits, that misinterpretations of the law itself cannot be considered “not intentional”. Until this point “ignorance of the law” has not been explicitly written into this defense under the FDCPA.

There have been a number of cases filed this year that have been stayed by the court waiting for the ruling on this case by the Supreme Court,” There will be immediate impact in those cases, and some others where the bona fide error defense is being used.

Obviously, errors of law cannot be used under the bona fide error defense going forward.


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