Consumer Law

Another Supreme Court Victory for Consumers: Ignorance of the Law Doesn't Excuse Collection Abuses

By Deepak Gupta

by Deepak Gupta

 In an opinion by Justice Sotomayor, the U.S. Supreme Court this morning handed consumers an important victory in the battle against abusive and deceptive debt-collection practices.  The Court ruled 7-2 that debt collectors who violate the Fair Debt Collection Practices Act can't evade liability for those violations by claiming ignorance or mistake of law. Resolving a circuit split, the Court rejected the collection industry's argument that the Act's defense for "bona fide errors," which excuses clerical or factual errors made despite adequate prevent procedures, also extends to errors of law.

I filed a brief, which you can read here, on behalf of five national consumer groups (Public Citizen, AARP, the National Association of Consumer Advocates, the National Consumer Law Center, and U.S. PIRG: The Federation of State PIRGs). We argued that a mistake-of-law defense would deter enforcement, inhibit the development of precedent, and create a "race to the bottom," encouraging the very abuses that Congress sought to prevent when it passed the FDCPA.  Justice Sotomayor's majority opinion cites and quotes our brief, explaining that "the dissent's reading would give a competitive advantage to debt collectors who press the boundaries of lawful conduct."  The opinion also twice cites the NCLC's manual on the statute.

Justice Breyer wrote a brief concurrence to stress that any dilemma lawyer-debt collectors face--between zealous representation of their clients and fear of personal liability--can be cured by the FTC advisory opinion process.  He notes that the FTC hasn't issued many such opinions, but says that he "would expect" the FTC to issue more opinions if the dilemma proves serious.  He joins the majority opinion "[o]n this understanding."  Justice Scalia writes separately to say that the Court could have rested on textual analysis alone.

Justice Kennedy, joined by Justice Alito, dissent. Speaking for myself, I'm mildly surprised that there's a dissent in this case.  The dissent displays some worrying hostility to plaintiffs' lawyers, class actions, and the statute itself.  Thankfully, it's just a dissent.

Full post as published by CL&P Blog on April 21, 2010 (boomark / email).