Jerman v. Carlisle

The Supreme Court will decide whether a debt collector violated the Fair Debt Collection Practices Act when it used allegedly deceptive forms to notify a debtor of a foreclosure on her home.

Countrywide Home Loans, a debt collector sought to foreclose on Karen Jerman's home and served her with a notice that said the debt would be considered valid unless she disputed the claim in writing.

Jerman's attorney informed the collector that the debt was paid in full and later got the foreclosure action dismissed. Jerman sought class certification and statutory damages under the act for misrepresenting that a dispute must be in writing and not maintaining procedures to avoid such errors.

But U.S. District Court for the Northern District of Ohio held that said Countrywide Home Loans' mistake fell under the "bona fide error" defense. That defense can be invoked only if a debt collector can show that the violation: (1) was unintentional; (2) resulted from a bona fide error; and (3) occurred despite the debt collector’s maintenance of procedures reasonably adapted to avoid such error.

Last August, the 6th U.S. Circuit Court of Appeals affirmed. Recognizing that federal appeals courts are "divided as to whether the bona fide error defense applies to mistakes of law or is limited to procedural or clerical errors," the three-judge panel followed the 10th U.S. Circuit Court in rejecting the majority position adopted by the 2nd, 8th and 9th Circuits.

In asking the Supreme Court to review the case, attorneys for Jerman argued that "Congress enacted the FDCPA to protect consumers by prohibiting abusive debt collection practices. Federal courts are deeply divided over whether the law excuses violations that result from legal mistakes. This conflict is particularly untenable in light of current economic conditions: as more consumers find themselves unable to repay their debts, efforts to collect those debts are likely to increase in both number and intensity."

Question presented: Whether a debt collector’s legal error qualifies for the bona fide error defense under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692.