Odsather v. Fay Servicing, LLC, 2:18-cv-00289

In 2000 Plaintiffs (Sheelagh and Steven Odsather) obtained a mortgage; in 2001 they completed a short sale, executed a $10,000 unsecured deficiency note to Beneficial, and Beneficial agreed to charge off the remaining mortgage balance.
Beneficial later sent letters indicating the deficiency note/mortgage was settled or paid in full and that original mortgage records were lost.
In June–July 2017 Fay Servicing notified Plaintiffs it would service the loan and, in a July 2017 notice, identified the $10,000 deficiency note as the account and warned that undisputed debts would be assumed valid.
Plaintiffs (Mr. Odsather) repeatedly disputed the debt orally (July, August, September 2017) and in writing (including sending the deficiency note and Beneficial correspondence), asserting the debt was settled and was an unsecured deficiency note—not an active mortgage.
Despite Plaintiffs’ disputes, Fay reported the debt to TransUnion and Equifax in October 2017 as a $10,000 home loan with foreclosure initiated and did not disclose the debt was disputed; Plaintiffs later disputed with the bureaus and Fay ultimately removed the tradeline in January 2018.
Plaintiffs sued under the FDCPA and other statutes; this motion sought partial summary judgment that Fay violated 15 U.S.C. §1692e(8) by failing to report Plaintiffs’ dispute to the credit bureaus.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Fay violated 15 U.S.C. §1692e(8) by reporting credit information without noting the debt was disputed	Odsather: Fay reported the debt to credit bureaus after oral and written disputes and failed to indicate the debt was disputed, violating §1692e(8)	Fay: Any failure was a bona fide error; employees failed to escalate calls and procedures require verification before reporting disputes	Court: Fay violated §1692e(8); summary judgment for Plaintiffs — reporting without noting dispute unlawful
Whether Fay may invoke the FDCPA bona fide error defense	Odsather: Defense inapplicable because Fay’s policy and practice delayed or ignored oral disputes	Fay: Error was unintentional and resulted from employee procedural failures; procedures are reasonably adapted to avoid errors	Court: Fay failed to meet its burden; legal misinterpretation of FDCPA and policies delaying reporting are not protected by bona fide error defense

Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078 (9th Cir. 2005) (oral disputes trigger collector duty to flag disputed status under §1692e(8))
Clark v. Capital Credit & Collection Serv., Inc., 460 F.3d 1162 (9th Cir. 2006) (FDCPA is generally strict liability; bona fide error is narrow exception)
Reichert v. Nat’l Credit Sys., Inc., 531 F.3d 1002 (9th Cir. 2008) (bona fide error is an affirmative defense; defendant bears burden)
McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939 (9th Cir. 2011) (elements a defendant must prove to establish bona fide error defense)
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573 (2010) (bona fide error defense does not cover mistaken interpretation of legal requirements)