Page 15 - 2019 News Letter 5-5-19

Sharp Thinking

No. 169 Perspectives on Developments in the Law from Sharp-Hundley, P.C. May 2019
7th Circuit Breathes New Life Into Debt

Collection Act’s Bona Fide Error Defense

By John T. Hundley, 618-242-0200, John@sharp-hundley.com
The bona fide error defense – a long standing but rarely successful part of
the Fair Debt Collection Practices Act (15 U.S.C. §§ 1692 et seq.) – had new life
breathed into it by the Seventh U.S. Circuit Court of Appeals last month.

Ruling in Abdollahzadeh v. Mandarich Law Group, LLP, __ F.3d __, 2019
WL 1894705, that court affirmed a summary judgment ruling in favor of a debt-
collector law firm which filed a collection lawsuit that was barred by the statute of
limitations in violation of the act.
The issue in Abdollahzadeh arose because the firm relied on data supplied
by the client debt-buyer (not the original creditor). That data listed the date of
last payment as a date when a payment had bounced. That date was within the
statute, but the date of the last good payment was not. The court said that
“Mandarich’s factual mistake – using the wrong date of last payment in its
statute-of-limitations analysis – resulted in unintentional violations of the Act”. Hundley

But, as the court admitted, to make the bona fide error defense set forth in 15 U.S.C. § 1692k(c)
“requires the debt collector to make three showings: ‘(1) it must show that the presumed FDCPA violation
was not intentional; (2) it must show that the presumed FDCPA violation resulted from a bona fide error…
and (3) it must show that it maintained procedures reasonably adapted to avoid any such error’” (quoting
Kort v. Diversified Collection Servs., Inc., 394 F.3d 530 (7th Cir 2005)). Abdollahzadeh contested all three
of these elements.
On the intent element, the court seemed to accept the so-called “clean heart and empty head”
reading of the statute. It said that the data from the client “consistently identified June 30, 2011, as the
date of Abdollahzadeh’s last payment. The firm was unaware of the key facts that the 2011 payment was
reversed and that the final payment to clear actually occurred in 2010. That negates any inference that
the FDCPA violations were intentional.”

Significantly, however, the client’s data showed the same balance due both before and after the
alleged 2011 payment, which arguably should have told the firm
that nothing actually was received in 2011. Moreover, in its
retainer agreement with the firm, the client affirmatively
disavowed “the completeness, correctness or accuracy of
Account Data.” Despite this, the Seventh Circuit said “no
evidence suggests that Mandarich intentionally violated the Act.”

The plaintiff attacked the firm’s reliance on the client data in

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
your particular situation, contact a Sharp-Hundley lawyer at 618-242-0200 or one of the addresses provided on page 2 of the newsletter.