Typo Can't Save Creditor From Collection Violation

Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...

By Stephanie Cumings

Jan. 14 — A debt collector can't blame its attempts to collect a discharged debt on a typo in the debtor's address (Buckley v. Afni, Inc., 2016 BL 2288, S.D. Ind., No. 1:14-cv-01275-TAB-WTL, 1/6/16).

Judge Tim A. Baker agreed that the creditor should have realized the debt had been discharged, but the attempts to collect didn't rise to the level of harassment and abuse like the debtor claimed.

Consumer Protection Lawsuit

Kristie Buckley received a discharge in bankruptcy, which included the discharge of three debts that were being collected by Afni, Inc., a collections agency. Afni updated its system to reflect that Buckley's AT&T and T-Mobile debts had been discharged, but neglected to do the same for the DIRECTV debt.

Five months after the discharge, Afni obtained Buckley's credit report in order to formulate a strategy to collect the DIRECTV debt and eventually sent Buckley a letter attempting to collect part of the debt in lieu of the full amount.

Buckley responded by suing Afni for various violations of the Fair Credit Reporting Act and the Fair Debt Collection Practices Act and both parties moved for summary judgment.

‘Internal Failure.'

Under the FCRA, creditors can't access a creditor report without some permissible purpose, and the court agreed with the debtor that Afni lacked such a purpose in this case. Afni argued that its confusion about the discharge was justified because Buckley's address on the DIRECTV account was slightly different than on the bankruptcy notice, but the court said this was “not enough to suggest Afni had reason to believe the DIRECTV debt was still valid.”

The court noted that the bankruptcy notice used other identifiers, like Buckley's name and Social Security number, that Afni could have used to identify her account.

“Therefore, Afni had enough information to connect Buckley's DIRECTV account with her bankruptcy, as it did with her other accounts,” the court said. “Not doing so was simply Afni's internal failure.” The court therefore granted summary judgment in favor of Buckley on the FCRA claim.

Harass, Oppress or Abuse?

However, the court didn't agree that Afni's debt collection attempt rose to the level of harassment in violation of the FDCPA. Afni's letter stated in relevant part: “We are making another attempt to contact you regarding your overdue account. In an effort to resolve this matter we will accept $100. Once paid, our records will reflect the status of your account with Afni, Inc. as closed as [sic] settled.”

The court said this language “was appropriately worded, even though the debt it sought to collect was not valid,” and didn't “appear intended to harass, oppress, or abuse.”

Similarly, the court found that Afni hadn't used “unfair or unconscionable means” in its debt collection efforts.

Not an Honest Mistake

However, the court found that Afni did violate the FDCPA by contacting Buckley directly even though it had been informed she was represented by an attorney. The court also found that it was unclear at this point whether or not Buckley was actually misled by the letter into believing she still owed the debt, and that question was better suited for trial than a summary judgment motion.

Finally, the court wasn't persuaded that Afni's collection attempts were simply a “bona fide error.” This would require showing that the mistake happened despite the creditor's procedures that are “reasonably adapted to avoid such error.”

The court said that Afni “fail[ed] to identify exactly what went wrong with Buckley's DIRECTV account and it fail[ed] to identify how its policies were aimed at preventing this error from happening.” Therefore, bona fide error was not a viable excuse for any of the claims against Afni.

Michael Anthony Eades and John Thomas Steinkamp of John T. Steinkamp and Associates, Indianapolis, represented the debtor.

Afni was represented by Justin M. Penn of Hinshaw & Culbertson, LLP, Chicago.

To contact the reporter on this story: Stephanie Cumings in Washington at sacree@bna.com

To contact the editor responsible for this story: Jay Horowitz at jhorowitz@bna.com

Request Bankruptcy Law News on Bloomberg Law