922 F.3d 810
7th Cir.2019Background
- Abdollahzadeh opened an MBNA credit-card account in 1998; last payment that actually cleared was ~Aug 3, 2010; a June 30, 2011 payment attempt was reversed and never cleared.
- FIA (formerly MBNA) charged off the account in March 2011 and sold the debt to CACH in April 2013.
- CACH provided Mandarich Law Group with account reports showing June 30, 2011 as the last payment date; Mandarich routinely relied on creditor-provided data and SquareTwo’s automated “scrub” to screen out out-of‑statute accounts.
- Mandarich sent a December 3, 2015 collection letter and filed suit in February 2016; Abdollahzadeh moved to dismiss based on Illinois’s five-year statute of limitations (arguing the last clearing payment was Aug 3, 2010).
- Mandarich learned from CACH before the dismissal ruling that the 2011 payment had not cleared but nonetheless opposed dismissal, arguing a good-faith basis to litigate; the state court dismissed the suit as time‑barred.
- Abdollahzadeh sued under the FDCPA; the district court granted Mandarich summary judgment based on the §1692k(c) bona fide error defense, and the Seventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FDCPA violations were intentional | Mandarich’s litigation after learning facts created a dispute of intent | Mandarich acted without knowledge the debt was time‑barred; any violation was an unintentional factual error | Court: No evidence of intentional violation; bona fide error as to intent satisfied |
| Whether reliance on creditor data was unreasonable | SquareTwo/CACH disclaimers and unchanged balance rendered reliance unreasonable as a matter of law | Reliance on creditor account reports and affidavit is permitted; FDCPA does not require independent verification | Court: Reliance reasonable; disclaimer and balance anomaly do not defeat defense |
| Whether Mandarich’s procedures qualify as “procedures” under §1692k(c) | Procedures were thin, unspecified, and insufficient (Leeb) | Firm had regular, orderly steps: receipt of account data, automated scrub, affidavit, attorney review | Court: Procedures, though simple, were regular and reasonably adapted; satisfy §1692k(c) |
| Whether the error was one of fact (eligible for defense) or law (ineligible) | Plaintiff implies collector should have known statute-of-limitations implications | Mandarich made a factual mistake about last-payment date, not a legal misinterpretation | Court: Error was factual; bona fide error defense applies |
Key Cases Cited
- Kort v. Diversified Collection Servs., Inc., 394 F.3d 530 (7th Cir. 2005) (sets three-part test for bona fide error defense under §1692k(c))
- Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573 (2010) (bona fide error defense covers factual mistakes, not legal misinterpretations)
- Hyman v. Tate, 362 F.3d 965 (7th Cir. 2004) (collectors need not independently verify debt to invoke bona fide error defense)
- Leeb v. Nationwide Credit Corp., 806 F.3d 895 (7th Cir. 2015) (a conclusory, thinly specified policy is insufficient to establish required procedures)
- Ross v. RJM Acquisitions Funding LLC, 480 F.3d 493 (7th Cir. 2007) (minimal, reasonable reliance on creditor procedures can suffice for the defense)
- Jenkins v. Heintz, 124 F.3d 824 (7th Cir. 1997) (example of elaborate compliance procedures supporting the defense)