On May 8, an Arizona federal judge held that a defendant debt collector was not entitled to a “bona fide error” defense in a claim brought under the Fair Debt Collection Practices Act because the collector failed to show it had either a policy or procedure in force to address the specific error in the case.
In Gibson v. US Collections West Incorporated, consumer Charlotte Gibson sent a letter to debt collector US Collections, refusing to pay on a debt being collected by US Collections. Despite having received the letter, US Collections sent out two additional communications to Gibson. US Collections admitted that these letters were sent in error because the file clerk who received Gibson’s letter misrouted the letter as a dispute instead of a refusal to pay, which resulted in the mislabeling of Gibson’s account.
Gibson filed suit against US Collections, alleging violations of the FDCPA. US Collections raised a bona fide error defense, claiming it had policies and procedures in place to address such refusals to pay.
In its holding, the court recognized that a defendant can assert a bona fide error defense in an FDCPA action as long as the defendant shows: (1) it violated the FDCPA; (2) the violation was unintentional; and (3) it maintained procedures reasonably adapted to avoid the violation. The Court further determined that in order to meet the third prong, a defendant must “maintain” “employ” or “implement” procedures to avoid the error and that those procedures must be “reasonably adapted” to avoid the specific violation at issue. Furthermore, a defendant must assert with specificity how the procedure or policy is tailored to avoid the specific mistake.
In this case, US Collections acknowledged it had no written policy on how to handle refusals to pay, but asserted the file clerks were trained on how to properly sort the mail. However, US Collections could not show how refusals to pay were handled in a specific manner or how to remedy a letter once it has been misrouted.
Since US Collections was unable to adequately explain its policy, it failed to meet its burden of proof to establish a bona fide error defense, and was found liable for violating the FDCPA.
Gibson sends the message that although policies are important, documented procedures ensuring that staff are regularly trained and that policies are followed are critical to avoiding mistakes.