In a divided en banc decision, the U.S. Circuit Court of Appeals for the Seventh Circuit has reversed (by vote of 7 to 4) a 2016 decision that a law firm when acting as a debt collector was shielded from liability under the Fair Debt Collection Practices Act when it relied on precedent that was subsequently overruled. The prior decision was described in this blog here.
The issue is the extent of the bona fide error defense that is provided by the Fair Debt Collection Practices Act for debt collectors who make a mistake despite having procedures in place to avoid such mistakes. A 2010 U.S. Supreme Court decision holds that the defense does not protect mistakes of law.
A prior three-judge panel of the Seventh Circuit had concluded that relying on a controlling appellate court decision was not a mistake of law and that the law firm had made no legal error even though the decision was later overruled.
The new decision however concluded that the law firm had violated the statute since the firm made a mistake in interpreting applicable law. And since the error was a mistake in interpreting law, the bona fide error defense had …