The United States Supreme Court Wednesday handed down a ruling that severely complicates the bona fide error defense under the FDCPA for ARM companies involved in litigation.

In a 7-2 ruling, the Court said that collection law firms could not use misinterpretations of the law in a bona fide error defense under the Fair Debt Collection Practices Act (FDCPA).

In the case — Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich — the plaintiff sued the defendant ARM firm for violating the FDCPA when it attempted to foreclose on her home after she had paid her mortgage. The Ohio firm required that Jerman prove in writing within 30 days that she had paid her Countrywide Home Loans mortgage; otherwise the debt would be assumed valid.  Jerman hired a lawyer to meet the Ohio firm’s written requirement, but FDCPA law does not require consumers to challenge debt claims in writing.

The firm, which specializes in real estate and foreclosure law, admitted in its 2006 validation notice to Jerman it intended to require she dispute the claim in writing. But Carlisle said it did not know that the FDCPA did not require a written dispute. After Jerman sued, the firm argued that it should not be held liable because it was an unintentional or “bona fide error” and has safe harbor protection under FDCPA.

A lower court ruling agreed with Jerman, noting that Carlisle had violated the FDCPA, but that it was not liable under the FDCPA for damages because the violation was unintentional. An appeals court decision affirmed that ruling, sending the case to the Supreme Court.

In an opinion written for the majority by Justice Sonya Sotomayor, the Court said that “ignorance of the law will not excuse any person, either civilly or criminally.” Carlisle had argued that misinterpretations of the law were written into the FDCPA. But Sotomayor and the majority disagreed, noting that ignorance of the law was not explicitly written into the FDCPA.

The dissent opinion, written by Justice Anthony Kennedy and joined by Justice Samuel Alito, focused on the impact that the ruling would have on ARM lawyers. They noted that it leaves the door open for potential abuses by plaintiffs’ attorneys.

“The decision aligns the judicial system with those who would use litigation to enrich themselves at the expense of attorneys who strictly follow and adhere to professional and ethical standards,” wrote Kennedy.

But Sotomayor spoke directly to that objection in the majority opinion, writing, “We do not foresee that our decision today will place unmanageable burdens on lawyers practicing in the debt collection industry.”

Valerie Hayes, general counsel and vice president of legal and government affairs for ACA International – a leading trade group in the accounts receivable management industry – agreed with the dissent, noting that there will be some immediate impact from the ruling.

“There have been a number of cases filed this year that have been stayed by the court waiting for the ruling on this case by the Supreme Court,” said Hayes. “There will be immediate impact in those cases, and some others where the bona fide error defense is being used.”

“Obviously, errors of law cannot be used under the bona fide error defense going forward,” she noted.

Hayes said that ACA intends to make errors of law an issue in its ongoing attempt to amend the FDCPA. “We’re disappointed that the bona fide error defense will not be extended to errors of law,” she said. “We will try to incorporate a provision within the bona fide error defense that would extend to errors of law.”

The entire Supreme Court opinion, including dissent and concurring opinions written by Justices Stephen Breyer and Antonin Scalia, can be read at


[EDITOR’S NOTE: For a follow-up on the Jerman case a year later, after it was remanded to the lower court, please read “Zero Damages: A Hollow Victory for Plaintiffs in Jerman v. Carlisle“]


Next Article: Appeals Court Ruling in Debt Buying FDCPA ...