Ninth Circuit Rules Debt Collector Contractually Requiring Creditors to Provide Accurate Information Could Not Rely On FDCPA’s Good Faith Defense of Mistake | Ballard Spahr srl

The United States Court of Appeals for the Ninth Circuit, in Urbina v. National Business Factors Inc., ruled that a debt collector could not rely on the FDCPA’s defense of good faith error by contractually obliging its creditors to provide accurate information.

The collection services contract that National Business Factors (NBF) had with a medical clinic contained a provision whereby the clinic would undertake to assign the receivables “” with only accurate data and that the balances reflect the results. legitimate and enforceable obligations of the consumer. »» FBN also used to ask its customers to notify FBN if they recognized any errors in the accounts listed in the automatic response it generated when customers returned accounts for collection.

After the clinic returned the claimant’s account to FBN for collection, FBN sent a letter to the clinic asking them to verify the amount owed. The next day, without receiving a response from the clinic, FBN sent a collection letter to the claimant asking for the balance owed plus interest. The plaintiff filed a complaint alleging violations of the FDCPA and sought summary judgment. In opposing the petition, NBF admitted that it had received an incorrect payment history from the clinic and that it had erroneously calculated the interest. Since NBF had charged too much interest and attempted to collect more than the plaintiff owed, it was not disputed that NBF had violated the FDCPA. However, FBN argued that it was entitled to the benefit of the FDCPA’s defense of good faith error and, therefore, that a summary judgment should be rendered in its favor.

The good faith error defense requires proving that the debt collector unintentionally violated the FDCPA, that the violation resulted from a good faith error, and that the collector maintained procedures “reasonably adequate to avoid the breach. violation ”. The district court agreed that NBF qualified for the defense of good faith error and issued summary judgment in favor of NBF.

In overturning the district court, the Ninth Circuit observed that “[t]the procedures that qualified for the good faith defense of error [in cases decided by the Ninth Circuit and other circuits] have been systematically applied by debt-by-debt collectors; they do not include ad hoc agreements committing creditors-customers to provide accurate information which is then implemented without asking questions.

As a fallback position, FBN argued that even though its collection service contract was insufficient to qualify for the good faith error defense, it still qualifies because it sends its customers follow-up requests aimed at to verify the accuracy of their information. While calling it “closer to the mark”, the Ninth Circuit found that it still fell short as it was not disputed that NBF had not waited for the clinic’s response before. to attempt to recover the applicant. The Ninth Circuit said that because NBF has not argued that it systematically waits for customers to respond before sending collection letters to debtors, NBF has failed to demonstrate that its practice of asking for account verification “Was genuinely calculated to detect errors of the kind that have occurred here. . “

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