7th Cir. Says FDCPA Bona Fide Error Did Not Require Independent Verification and Procedural Perfection; A Collection Lawyer Can Rely on Their Client

In Abdollahzadeh v. Mandarich Law Grp., LLP, No. 18-1904, 2019 U.S. App. LEXIS 12887, at *2-3 (7th Cir. Apr. 29, 2019), the Court of Appeals for the Seventh Circuit found that a collection attorney could rely on its client’s information under the bona fide error rule.

Abdollahzadeh challenges that ruling on several grounds. First, he argues that Mandarich’s continuation of the collection action after it learned the true last-payment date creates a factual dispute on the issue of intent. He also contends that the law firm’s reliance on CACH’s representations about the last-payment date was an abdication of its duty to engage in meaningful review and thus was unreasonable as a matter of law. Finally, he characterizes the firm’s procedures for weeding out time-barred debts as “thinly specified policies” insufficient to support the affirmative defense.  We reject these arguments and affirm. The bona fide error defense doesn’t require the independent verification and procedural perfection Abdollahzadeh seems to think necessary. The undisputed evidence shows that any FDCPA violations were the unintentional result of a bona fide mistake. And Mandarich had procedures in place that, while simple, were reasonably adapted to avoid late collection efforts.  . . . Abdollahzadeh also challenges Mandarich’s reliance on the account data provided by CACH. He argues that the accuracy disclaimer in the retainer agreement made the firm’s decision to trust CACH’s last-payment date unreasonable as a matter of law. He also claims that the firm should have noticed that his balance remained unchanged after the reported last payment, which should have prompted further inquiry. First, the disclaimer in the retainer agreement doesn’t defeat the bona fide error defense because “the FDCPA does not require collectors to independently verify the validity of the debt to qualify for the ‘bona fide error’ defense.” Hyman v. Tate, 362 F.3d 965, 968 (7th Cir. 2004). Abdollahzadeh relies on McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939 (9th Cir. 2011), but that case bears no resemblance to this one. Under the agreement at issue there, the creditor made “no warranty as to the accuracy or validity of data provided,” and the debt collector was “responsible to determine [its] legal and ethical ability to collect.” Id. at 945 (alteration in original). Under those circumstances, the Ninth Circuit concluded that the debt collector’s reliance on a communication from the creditor was “unreasonable as a matter of law,” citing the disclaimer as a factor in its analysis. Id. at 949. Moreover, McCollough contains a factual twist not present here: the unreliable representation was an email from the creditor contradicting information in the creditor’s own account file. Id. at 945. Here, Mandarich relied on the account information itself, which consistently (though incorrectly) identified the last-payment date as June 30, 2011. Abdollahzadeh also points to our decision in Turner v. J.V.D.B. & Associates, Inc., 330 F.3d 991 (7th Cir. 2003), but that case doesn’t help him. In Turner we merely suggested that “an agreement [between a collector and] its creditor-clients that debts are current” would be a “reasonable preventative measure[]” for a debt collector to take. Id. at 996. We’ve never made such an agreement a prerequisite to the bona fide error defense. Regardless, the effect of SquareTwo’s general disclaimer (if any) was displaced by the affidavit Mandarich received from CACH attesting to the accuracy of its reports.  Finally, no inference of intent can be drawn from Mandarich’s failure to notice   that CACH’s records displayed an identical balance on either side of the reported date of last payment. The law firm made a mistake—no one disputes that. Had it undertaken a more searching review of the Schedule 1 document and Account Information Report from CACH, it’s possible that it would have noticed this discrepancy, notified CACH, and avoided litigation altogether. But  the bona fide error defense doesn’t demand perfection, and independent verification of the debt isn’t a prerequisite. Hyman, 362 F.3d at 968.