Mehdi Abdollahzadeh v. Mandarich Law Group, LLP
922 F.3d 810 (2019)
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Rule of Law:
A debt collector is not liable under the Fair Debt Collection Practices Act (FDCPA) for attempting to collect a time-barred debt if the collector can show by a preponderance of the evidence that the violation was an unintentional, bona fide error of fact and occurred despite the maintenance of procedures reasonably adapted to avoid such an error.
Facts:
- In 1998, Mehdi Abdollahzadeh opened a credit-card account with MBNA America Bank.
- Abdollahzadeh defaulted, making his last successful payment on August 3, 2010.
- On June 30, 2011, Abdollahzadeh attempted another payment, but the payment did not clear.
- In April 2013, the bank sold the delinquent account to a debt buyer, CACH, LLC.
- CACH referred the account to the Mandarich Law Group for collection.
- CACH's records provided to Mandarich incorrectly identified the failed June 30, 2011 payment attempt as the last payment on the account.
- Relying on this incorrect date, Mandarich sent a collection letter to Abdollahzadeh on December 3, 2015.
- After receiving no response, Mandarich filed a collection lawsuit against Abdollahzadeh in state court on February 11, 2016.
Procedural Posture:
- The underlying state court collection action brought by Mandarich against Abdollahzadeh was dismissed as time-barred.
- Abdollahzadeh then sued Mandarich in the U.S. District Court, alleging violations of the Fair Debt Collection Practices Act (FDCPA).
- Mandarich moved for summary judgment, invoking the bona fide error affirmative defense under § 1692k(c) of the FDCPA.
- The district court granted summary judgment for Mandarich, finding it had met the requirements for the defense.
- Abdollahzadeh, as the appellant, appealed the summary judgment ruling to the U.S. Court of Appeals for the Seventh Circuit, with Mandarich as the appellee.
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Issue:
Does a debt collector qualify for the FDCPA's bona fide error defense when it attempts to collect a time-barred debt due to its reliance on incorrect last-payment information supplied by its client, and its error-prevention procedures do not require independent verification of that client data?
Opinions:
Majority - Sykes, Circuit Judge.
Yes. A debt collector qualifies for the bona fide error defense under these circumstances because the FDCPA does not require procedural perfection or independent verification of client-provided data. The court applied the three-part test for the bona fide error defense, finding that Mandarich satisfied each element. First, the violation was unintentional because Mandarich relied on the account information provided by CACH and was unaware that the last payment date was incorrect. Second, the mistake was a bona fide error of fact—the wrong date—not a misinterpretation of the law. Third, Mandarich maintained procedures reasonably adapted to avoid such errors; these procedures included an automated data 'scrub' by its client's parent company, an affidavit from the client attesting to the data's accuracy, and a review by a Mandarich attorney to check the last payment date against the applicable statute of limitations. The court held that while these procedures were simple and imperfect, they were reasonable and did not need to be 'state of the art' to qualify for the defense.
Analysis:
This decision solidifies the bona fide error defense as a significant protection for debt collectors, particularly those who rely on data from third-party debt buyers. The court clarifies that 'reasonable procedures' do not require independent verification of a creditor's data, lowering the procedural burden on collection firms. This precedent makes it more difficult for consumers to succeed on FDCPA claims based on factual errors originating from the creditor, as long as the collector has a basic, orderly process for reviewing accounts. The ruling reinforces that the defense is available for clerical or factual mistakes, insulating collectors who can demonstrate they had a reasonable, albeit imperfect, system in place to prevent such errors.
