Debt collection professionals are preparing themselves for two U.S. Supreme Court opinions – one challenging the safe harbor clause for bona fide errors in the Fair Debt Collections Practices Act (FDCPA) and another which questions if a government backed student loan can be discharged through bankruptcy. Some industry observers say the outcome of both cases could have far reaching implications for some or most debt collection professionals.
Oral arguments in the case of Karen L. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, LPA and Adrienne S. Foster, which challenges the bona fide error defense for ARM professionals, are set for January ("U.S. Supreme Court Oral Arguments Scheduled for FDCPA Case," Dec. 8). Earlier this month, the Court heard arguments in United Student Aid Funds, Inc. v. Espinosa, a case involving the discharge of federally-backed student loans.
As issue is whether a debt collector's legal error qualifies for the bona fide error defense under the FDCPA.


Lawyers for Jerman are suing Carlisle, McNellie, Rini, Kramer & Ulrich for violating the FDCPA when it attempted to foreclose on her home. 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. Countrywide is now owned by Bank of America. 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 Ohio firm, which specializes in real estate and foreclosure law, admitted that in its 2006 validation notice to Jerman it intended to require she dispute the claim in writing. But the law firm 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.

Jerman’s lawyers have asked the court to decide if a debt collector’s legal error qualifies for the bona fide error defense under FDCPA. They contend it does not and want the court to conclude that the bona fide error defense is “categorically unavailable for any mistake of law.”

Attorney Kevin Russell argued for Jerman while George Coakley represented Carlisle, McNellie, Rini, Kramer & Ulrich. A PDF transcript of the arguments is available on the Supreme Court’s web site.

According to Courthouse News Service, Justice Stephen Breyer, Chief Justice John Roberts, Justice Ruth Bader Ginsburg, and Justice Sonia Sotomayor were the most active jurists in questioning the arguing attorneys.