On September 4, 2020, the Second Circuit Court of Appeals overturned summary judgment granted to a debt collector who had sent collection documents to the wrong person, ruling that it was not entitled to the bona fide error defense because it lacked procedures governing the factual mistake.

Chiari & Ilecki (“C&I”) attempted to collect a debt from William J. Wagner, Jr.  C&I located the appellant, William J. Wagner, and incorrectly concluded he was the debtor.  C&I contacted Wagner, who repeatedly denied he was the debtor, said that neither he nor anyone in his family went by “junior,” and verbally provided a date of birth and Social Security information that did not match the debtor’s.  C&I nonetheless believed Wagner was or knew the debtor and sent subpoenas duces tecum and other collection documents to his address.

Wagner brought suit, alleging various violations of the Fair Debt Collection Practices Act.  The U.S. District Court for the Western District of New York granted summary judgment to C&I, holding that (1) it had not used misleading, unfair, or unconscionable means to collect the debt and (2) although it had violated the FDCPA by sending subpoenas duces tecum to Wagner after he had twice informed them he was not the debtor, it was entitled to the bona fide error defense.

The Second Circuit upheld the District Court’s ruling on misleading, unfair, or unconscionable means, but found that C&I was not entitled to the bona fide error defense. That defense shields debt collectors from violations of the FDCPA caused by factual mistakes if the debt collector can show the violation was not intentional, it resulted from a bona fide error, and there were procedures in place reasonably adapted to avoid such an error.  The Court concluded that C&I lacked proper procedures to avoid its error with Wagner.  Specifically, C&I “had no written policies for situations in which employees of C&I believe that a debtor may live at a particular residence, but are not certain; C&I has information about the location of a person with a name similar to a debtor’s, or a non-debtor with a name similar to a debtor informs C&I that they are not the debtor C&I sought to contact.”  Although C&I asserted it had unwritten policies governing these situations, the Court found that it was reasonable to conclude from the facts that these unwritten policies were either insufficient or not actually followed.

This decision emphasizes the view of some courts about the need for robust written policies addressing mistakes of fact to ensure access to the bona fide error defense.