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Ohio debt collection question goes to U.S. Supreme Court: Sheryl Harris

By Sheryl Harris, The Plain Dealer
January 12, 2010, 5:41PM

Tomorrow the U.S. Supreme Court hears a debt collection squabble born in Cleveland.

The dispute boils down to whether a debt collector can use a legal error as a defense for failing to comply with the Fair Debt Collection Practices Act, the law that protects consumers from abusive debt collection efforts.

It started when Countrywide hired the Cleveland law firm Carlisle, McNellie, Rini, Kramer & Ulrich to file a foreclosure action against Karen Jerman, who had already paid off the mortgage on her Ashtabula home.

In the foreclosure filing, Carlisle, McNellie included copies of a required notice that warns consumers that they have 30 days to dispute an alleged debt. The notice mistakenly – and this is the error at issue – said the dispute must be filed "in writing."

Countrywide quickly dropped its foreclosure case, but Jerman's law firm, the Icove Group, forged ahead with a class-action suit on behalf of other debtors who received incorrect form letters.

Carlisle, McNellie said it misunderstood the act's requirements but because the mistake was unintentional, it should be protected from suits under Fair Debt Collection Practices Act provisions that shield collectors who make unintended clerical errors.

Consumer groups and states including Ohio have lined up in support of Jerman.

They say the fair debt law sets up clear rules that apply only to companies and attorneys who regularly collect debts. Letting collectors claim ignorance of the law, they argue, would let companies freely skirt the rules Congress put in place to protect consumers.

A decision could take months.

Comments Posted by Richard Davet January 13, 2010, 12:54PM:

This is a blatant attempt of the financial industry to neuter the FDCPA via the judicary.

Carlisle, McNellie is a major "player" in the Goverment Sponsored Enterprise Business Model as a debt collector filing thousands of foreclosures. As such, they seek immunity from clearly written laws protecting consumers (FDCPA).

As a "debt collector" in the GSE Business Model, Carlisle McNellie holds a distinct competitive advantage over other debt collectors, that is, you cannot simply hang up the phone on them as they can and will foreclose on your home.

The GSE Business Model is a failed Model that has caused the imploding of financial markets wordwide. It's "players" must be held accountable.

Hats off to Ms. Jerman for taking them to task! The judicary has too long rubber stamped their activites for their own pecuinary interest. It is time to even the playing field for the consumers by enforcing the FDCPA we already have on the books.

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I thought (mistakenly?) that all debt disputes with third party collectors had to be "in writing". That would be the sane way to do it for the consumer's protection, in my view. There must be something left out of this story....

Is there some obscure Ohio statute prohibiting the common practice of asking for debt disputes to be done in writing?

In the foreclosure filing, Carlisle, McNellie included copies of a required notice that warns consumers that they have 30 days to dispute an alleged debt. The notice mistakenly – and this is the error at issue – said the dispute must be filed "in writing."

According to the FTC website:

Failing to send required consumer notice: The FDCPA requires that debt collectors send consumers a written notice that includes, among other things, the amount of the debt, the name of the creditor to whom the debt is owed, and a statement that, if within thirty days of receiving the notice the consumer disputes the debt in writing, the collector will obtain verification of the debt and mail it to the consumer.(6) In 2002, more than 1,700 consumers complained to the Commission that collectors who contacted them did not provide such a notice. Many consumers who do not receive the notice are unaware that they must send their dispute in writing if they wish to obtain verification of the debt.

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Court takes debt collection case (June 29, 2009)

Case Reference: 

The Supreme Court will decide whether a debt collector violated the Fair Debt Collection Practices Act when it used allegedly deceptive forms to notify a debtor of a foreclosure on her home.

Countrywide Home Loans, a debt collector sought to foreclose on Karen Jerman's home and served her with a notice that said the debt would be considered valid unless she disputed the claim in writing.

Jerman's attorney informed the collector that the debt was paid in full and later got the foreclosure action dismissed. Jerman sought class certification and statutory damages under the act for misrepresenting that a dispute must be in writing and not maintaining procedures to avoid such errors.

But U.S. District Court for the Northern District of Ohio held that said Countrywide Home Loans' mistake fell under the "bona fide error" defense. That defense can be invoked only if a debt collector can show that the violation: (1) was unintentional; (2) resulted from a bona fide error; and (3) occurred despite the debt collector’s maintenance of procedures reasonably adapted to avoid such error.

Last August, the 6th U.S. Circuit Court of Appeals affirmed. Recognizing that federal appeals courts are "divided as to whether the bona fide error defense applies to mistakes of law or is limited to procedural or clerical errors," the three-judge panel followed the 10th U.S. Circuit Court in rejecting the majority position adopted by the 2nd, 8th and 9th Circuits.

In asking the Supreme Court to review the case, attorneys for Jerman argued that "Congress enacted the FDCPA to protect consumers by prohibiting abusive debt collection practices. Federal courts are deeply divided over whether the law excuses violations that result from legal mistakes. This conflict is particularly untenable in light of current economic conditions: as more consumers find themselves unable to repay their debts, efforts to collect those debts are likely to increase in both number and intensity."

Question presented: Whether a debt collector’s legal error qualifies for the bona fide error defense under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692.

It looks as though the request asking for a dispute in writing was delivered BEFORE the attorney notified Countrywide and assorted lawyers of the foreclosure error. The foreclosure action was dismissed AFTER the notice was received. Timing matters. 

Why aren't they suing Countrywide for trying to foreclose on a paid in full home? THAT would be a case. This is a nuisance suit, IMHO.

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connect the dots
"This is a blatant attempt of the financial industry to neuter the FDCPA via the judicary."

Read the case

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The Supreme Court arguments were presented today in Jerman v. Carlisle. Here's the transcript.

Tick- tock, tick- tock......

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How can a law firm use ignorance of the law as an excuse?  That's just crazy.

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It is no crazier than the Supreme Court allowing corporations, both foreign and domestic, to contribute without caps to political campaigns. All the Supreme Court seemed to take into account is the absurd notion that corporations have "personhood" and should be allowed to "speak" right out of their wallets since they have no mouths.

We will soon enough be the "Corporate States of America" because individuals (aka "real people with real mouths") are still capped as to what they can donate to their candidates.

I thought I had seen the worst verdict that could ever possibly come out of the Supreme Dummies when the Kelo v. New London verdict was handed down allowing governments to exercise eminent domain in order to hand land over to corporations for the governments' ultimate benefit (more taxes).

Now they have handed over the government, too. One thing the Supremos did NOT seem to take into account is that corporations do not really need them. The Board of Directors will dictate the rules. Idiots have ruled themselves out of a job in the not-too-distant future.

I am seriously looking for a new country now. This one is done.

Nothing these Supremos say, in this case or any other, will surprise me now.
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