District Court (Cal.) Says Debt Collector Can Use Reasonable Policies and Procedures Defense to Establish that It Did Not Receive Debtor’s Dispute Letter

In Williams v. Enhanced Recovery Co., LLC, No. 18-cv-03699-HSG, 2019 U.S. Dist. LEXIS 137631 (N.D. Cal. Aug. 14, 2019), Judge Gilliam granted summary judgment to a debt collector.

The Court finds that ERC has carried its burden to establish an entitlement to the bona fide error defense, and the Court thus does not consider whether there is a material dispute of fact concerning whether ERC received the Dispute Letter. ERC’s motion and supporting declaration describe at length the redundant policies and procedures in place at ERC to “properly retrieve[], process[], and record[] all correspondence[s] sent by, or on behalf of, account holders.” Mot. at 3. Specifically, only two designated ERC employees have authority to retrieve United States Postal Service (“USPS”) mail from the post office. Id. (citing Davis Decl. ¶ 22). And the USPS post office maintains a list of the designated employees, such that mail is only released to proper personnel. Id. (citing Davis Decl. ¶ 22). Further, keys for retrieving mail from the post office are securely maintained at ERC’s offices by management-level employees, and the keys “may be checked out only by authorized employees, which process is logged, and the keys are returned to [management] upon return from the post office.” Id. (citing Davis Decl. ¶ 22). Once collected from the post office, mail “is opened and sorted in a secure area at ERC,” and mail not deemed payments is reviewed by ERC’s “correspondence mail team.” Id. at 3-4 (citing Davis Decl. ¶¶ 22-23). ERC represents that under its policies and procedures, such team members systematically review correspondence to identify the correct account associated with the correspondence, including by reviewing the “name, address, social security number, creditor name, account balance, file numbers, account numbers, etc.” Id. at 4 (citing Davis Decl. ¶ 25). If the team member is unable to identify the [*9]  relevant account, the correspondence is immediately provided to management, which undertakes a second review, to locate the proper account. Id. (citing Davis Decl. ¶ 26). In the event that second review fails, ERC “will use the return address in the correspondence to mail a letter requesting additional information from the sender to make another attempt to identify any relevant collection accounts in ERC’s account management system.” Id. (citing Davis Decl. ¶ 26). Any correspondence for which an associated account is not found is logged. Id. (citing Davis Decl. ¶ 26). If an associated account is found and the correspondence indicates that there is a dispute, the account is flagged as in “dispute” status which, among other things, ensures that any reporting to consumer reporting agencies will reflect the disputed status. Id. at 4-5 (citing Davis Decl. ¶ 27). All told, ERC’s policies and procedures are designed “to ensure that every individual piece of correspondence received by ERC is associated with the correct account, and that ERC takes all appropriate actions with respect to the account based on the substance of the correspondence.” Id. at 3 (citing Davis Decl. ¶ 21). And the policies and procedures are memorialized in duplicative written policies that were in effect at times relevant to this case. Id. at 5 (citing Davis Decl. ¶¶ 30-33). Despite these policies and procedures, ERC represents that it has no record of receiving the Disputed Letter or any other correspondence from Plaintiff concerning the Subject Account. Id. (citing Davis Decl. ¶ 8). And based on ERC’s review of the Disputed Letter, ERC contends that “information included [therein] would have been sufficient for ERC to identify the Subject Account.” Id. (citing Davis Decl. ¶ 37). In turn, if ERC received the Dispute Letter and employees complied with ERC’s policies in procedures, any subsequent periodic reports to consumer reporting agencies should have reflected the disputed status. Plaintiff does not dispute (1) the adequacy of ERC’s policies and procedures, (2) that compliance with the polices and procedures as described above would have prevented the alleged FDCPA violation, (3) that mishandling of a correspondence despite these policies and procedures would be unintentional, or (4) that an ERC employee’s accidental mishandling of a correspondence despite these policies and procedures would constitute a clerical—and thus  bona fide—error. Instead, Plaintiff’s sole response is that the bona fide error defense “does not come into play, because ERC claims that it never received the letter in the first place.” Opp. at 3. The Court disagrees. It is entirely logical that a debt collector like ERC would, after failing to find any record of receiving a correspondence such as the Dispute Letter at issue here, invoke the bona fide error defense, provided the company had proper policies and procedures to prevent the alleged FDCPA violation. And nothing in the FDCPA’s text precludes debt collectors from relying on the bona fide error defense in the alternative. Because debt collectors like ERC may assert the bona fide error defense in the alternative, the real question is whether ERC has carried its burden of proving the defense applies. And the Court finds that ERC has carried its burden. To start, and even assuming Plaintiff sent the Disputed Letter to ERC, the alleged FDCPA violation resulted either from an error with the post office, such that ERC never received the correspondence, or an ERC employee mishandling the letter at some point between retrieving the letter from the post office and the point at which employees review the letter. Either way, there is no evidence that such an error was intentional. See McCollough, 637 F.3d at 948. Nor is there any indication that such a mistake—if attributable to ERC—would be anything other than a clerical mistake. See Jerman, 559 U.S. at 587. Finally, as detailed in length above, ERC has adequately demonstrated that its redundant policies and procedures were reasonably adapted to avoid such mishandling of correspondence. See McCollough, 637 F.3d at 948. For these reasons, the Court finds that ERC, as the party that would bear the burden of proving the bona fide error defense at trial, has shown that no reasonable trier of fact could find against it as to this defense.