In Abdollahzadeh v. Mandarich Law Group, LLP, the Seventh Circuit affirmed summary judgment for a debt collector under the Fair Debt Collection Practices Act, finding that its procedures to prevent the collection of a time-barred debt were reasonable enough to support a bona fide error defense.
As background, a consumer opened a credit card account in 1998. He defaulted, with his last full payment made in August 2010. In June 2011, the consumer attempted to remit another payment, but it never cleared.
The delinquent account was sold to a debt buyer, who referred collection of the debt to a law firm. The debt buyer’s data indicated that that the consumer’s last payment on the account was in June 2011, even though that payment never cleared. In reliance on this information, the law firm sent a debt collection communication to the consumer and then sued him in Illinois state court.
Upon the consumer’s motion, the state court ultimately dismissed this lawsuit because the last actual payment, the August 2010 payment, occurred outside of Illinois’ five-year statute of limitations.
The consumer subsequently filed a federal court lawsuit against the defendant law firm under the FDCPA for attempting to collect a time-barred debt.
In its motion for summary judgment in the FDCPA case, the law firm argued that this was an unintentional bona fide error and that it had reasonable procedures in place to prevent the collection of time-barred debts. For example, the law firm relied on information provided by its client, the debt buyer, which was reaffirmed by an affidavit from the debt buyer used in the state court case. The relevant dates for the accounts were subjected to an automated “scrub” which flagged accounts for which the statute of limitations might have expired. An attorney also examined the account information available before filing the lawsuit to confirm that the statute of limitations had not expired.
The federal district court found that these procedures were sufficient for a bona fide error defense to the FDCPA, a decision that was affirmed on appeal. In its ruling, the Seventh Circuit repeatedly stressed that “reasonable procedures” were all that was required to invoke the bona fide error defense – not perfect procedures or independent verification of the debt information, as the consumer tried to argue.
Abdollahzadeh is yet another case that stresses the importance of robust policies and procedures designed to ensure compliance with the FDCPA. However, unlike some other cases, it provides concrete examples of what type of procedures are likely to be considered reasonable by a court.