The Defense Against Good Faith Mistakes Does Not Always Apply in “Debt Amount” Cases

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Court decisions have long established that the defense of good faith error generally applies only to errors of fact and not to errors of law. What does it mean? In the context of listing the amount of debt owed in a collection letter, the good faith error would generally apply – assuming all other elements are met – in situations where there is a typographical error or an erroneous mathematical calculation. However, it would not apply when the debt collector has misinterpreted how to comply with the Fair Debt Collection Practices Act (FDCPA). A recent case in the Arizona district shows an example of the latter.

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So what happened?

In Bazan vs. Hammerman & Hultgren PC, the defendant, a collection law firm, sent a letter to the consumer stating that the amount of the debt was “the sum of $ 6,162.30, plus accrued interest in the amount of 691.90 $, plus accrued interest at the contract rate of 24.99% per annum from April 16, 2019. “The consumer sued, alleging that the letter violated the FDCPA because it was not clear which amount of debt was actually owed and was misleading.

The consumer has filed a partial motion for judgment on the pleadings, which is, in essence, a request for judgment on the merits of the case, but made at the start of the dispute. The consumer argued that the problematic statement could be read in three different ways, at least one of which would be false:

  1. This $ 691.90 represents the interest accrued between April 16, 2019 and the date of the letter.
  2. That the balance is $ 7,980.60 (including identified interest plus additional interest assessed on the original amount of $ 6,162.30).
  3. That the balance is $ 8,107.17 (including identified interest plus additional interest assessed on the sum of the initial amount AND identified interest).

The court noted:

While a generally astute or savvy person may object to one or more of these interpretations as being less likely but not entirely impossible, the less sophisticated debtor standard “assures us.[s] that the FDCP protect all consumers, the gullible and the astute. . . the ignorant, the thoughtless and the gullible. “

With this in mind, the court concluded that a violation of the FDCPA had occurred. Among several other arguments advanced, the defendant argued that he should be relieved of his liability because the defense of good faith error applies. The court rejected this line of thought, however, stating:

The defense of good faith error is inapplicable here because the alleged violations — making a misleading representation and not effectively transmitting a debt — arise from legal judgments as to the obligations of the FDCPA; they are not typos, faulty mathematical calculations or printing errors.

Thereupon, the court allowed the partial motion for judgment on the pleadings in favor of the consumer.

InsideARM Perspective

Indeed, the court found that problems related to the wording used by debt collectors in their collection letters do not qualify for the defense of good faith error. Some examples of where the good faith error applied to the situation can be found in this article.

For an in-depth look at the good faith defense of error, iA Case Law Tracker subscribers can click here to see a full list of court decisions that deal with the good faith defense of error (there have been some). 53 since 2018), including short summaries of each case and a quick rundown of where things worked and where they didn’t.

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