Audit What You Credit Report or Lose the Bona Fide Error Defense

A court decision out of the Western District of Washington (W.D. Wash.) came out on Friday that discusses the balance between the credit reporting and the Fair Debt Collection Practices Act’s (FDCPA) bona fide error defense. The case is Burr v. Evergreen Prof’l Recoveries, Inc. and the key takeaway is to audit what you report.

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What Happened?

This case arises out of plaintiff’s medical debt, which was broken up into a group of several accounts. At some point, defendant sued plaintiff to collect on this debt. The parties settled the collection lawsuit, and defendant now agrees that the underlying debts are no longer owed.

The problem occurred when plaintiff reviewed her credit report and saw that defendant continued to negatively report on two of the accounts. Plaintiff sent a letter to defendant demanding that they delete the entries, which defendant did. However, defendant then erroneously re-reported the accounts and continued to do so until plaintiff said she would file an FDCPA lawsuit against them. Defendant again corrected the reporting, and plaintiff filed the lawsuit in question.

The Court’s Decision

The court quickly concluded that an FDCPA violation occurred based on defendant’s own admission to the errors. The court then turned to the question of whether defendant was entitled to the bona fide error defense, and summarily decided the answer was “no.”

The court’s reasoning turned primarily on the requirement for defendant, if it seeks to assert the bona fide error defense, to have maintained procedures reasonably adapted to avoid the violation. The court found:

The Court has reviewed the briefing of the parties and the declaration of Evergreen president Monica Severtsen and finds there is no evidence for a reasonable juror to conclude that Evergreen maintained a specific procedure adapted to avoid the initial reporting error. Instead, there is only evidence that Evergreen has a system of coding accounts as disputed or paid off. There is no evidence that Evergreen has procedures to double check coding before it is implemented, or to audit the coding after it has been completed.

With that, the court granted summary judgment in favor of plaintiff on the FDCPA claim.

Want to see how courts are ruling on the bona fide error defense?
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