FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MERCEDES URBINA, No. 19-16055
Plaintiff-Appellant,
D.C. No.
v. 3:17-cv-00385-WGC
NATIONAL BUSINESS FACTORS
INC., ORDER AND
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the District of Nevada
William G. Cobb, Magistrate Judge, Presiding
Submitted August 12, 2020*
San Francisco, California
Filed November 5, 2020
Before: A. Wallace Tashima and Morgan Christen, Circuit
Judges, and Joseph F. Bataillon,** District Judge.
Order;
Opinion by Judge Christen
*
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
**
The Honorable Joseph F. Bataillon, United States District Judge for
the District of Nebraska, sitting by designation.
2 URBINA V. NAT’L BUS. FACTORS
SUMMARY***
Fair Debt Collection Practices Act
The panel filed: (1) an order granting a request for
publication, withdrawing the mandate, withdrawing a
memorandum disposition, and replacing the memorandum
disposition with an opinion; and (2) an opinion reversing the
district court’s grant of summary judgment in favor of the
defendant debt collector in an action under the Fair Debt
Collection Practices Act and remanding for further
proceedings.
Agreeing with the Eleventh Circuit, the panel held that
the FDCPA’s bona fide error defense does not allow debt
collectors to avoid liability by contractually obligating
creditor-clients to provide accurate information, nor by
requesting that creditor-clients provide notice of any errors
in the accounts assigned for collection without waiting to
receive a response before instituting collection efforts.
COUNSEL
Christopher P. Burke, Reno, Nevada; Michael C. Lehners,
Reno, Nevada; for Plaintiff-Appellant.
Robert C. Herman, Carson City, Nevada, for Defendant-
Appellee.
***
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
URBINA V. NAT’L BUS. FACTORS 3
ORDER
Plaintiff-appellant’s request for publication, filed
August 20, 2020, is GRANTED. The original mandate that
issued on September 8, 2020, is withdrawn. The
memorandum disposition filed on August 17, 2020, and
reported at 816 F. App’x 232 (9th Cir. 2020), is withdrawn
and replaced with an Opinion filed together with this order.
Further petitions for rehearing or rehearing en banc may be
filed.
OPINION
CHRISTEN, Circuit Judge:
In this appeal, we consider whether a debt collector may
invoke the “bona fide error” defense to avoid liability for
violations of the Fair Debt Collection Practices Act
(FDCPA), 15 U.S.C § 1692 et seq., by contractually
obligating creditor-clients to provide only accurate
information regarding delinquent accounts. Plaintiff
Mercedes Urbina sued National Business Factors (NBF), a
debt collector that undertook collection efforts against Urbina
based on information it received from her creditor. Some of
the information proved to be incorrect. NBF argues that
because it contractually required Urbina’s creditor to provide
it with accurate information, NBF qualified for the FDCPA’s
bona fide error defense. 15 U.S.C. § 1692k(c). The district
court granted summary judgment in favor of NBF,
concluding that NBF was entitled to the defense because it
employed a procedure reasonably adapted to avoid errors of
the type that occurred in Urbina’s case.
4 URBINA V. NAT’L BUS. FACTORS
We have jurisdiction pursuant to 28 U.S.C. § 1291, and
we reverse the district court’s judgment. The two procedures
NBF relied upon did little more than evidence an attempt to
outsource the duties the FDCPA imposes upon debt
collectors. We conclude the FDCPA’s bona fide error
defense does not allow debt collectors to avoid liability by
contractually obligating creditor-clients to provide accurate
information, nor by requesting that creditor-clients provide
notice of any errors in the accounts assigned for collection
without waiting to receive a response before instituting
collection efforts.
I.
The basic facts are not in dispute. NBF and Tahoe
Fracture Clinic (TFC) entered into a Collection Service
Agreement in 2014 whereby TFC agreed that it would assign
outstanding debts for collection “with only accurate data and
that the balances reflect legitimate, enforceable obligations of
the consumer.” Although NBF’s form agreement does not
mention any particular practice for verifying the amount of
debts assigned for collection, NBF claims it follows a
standard practice when clients refer accounts for collection.
Specifically, NBF represented in the district court that it
routinely generates an automatic response listing the account
name and number, the total amount due, and the date of last
payment. According to NBF, its routine practice is to request
that its clients notify NBF if they recognize errors in any of
the accounts listed. NBF also follows a practice of
calculating interest based on the date of the debtor’s last
payment.
This case arises from an unpaid balance on a medical bill
for treatments Urbina received at TFC in 2015 and 2016. In
URBINA V. NAT’L BUS. FACTORS 5
July 2016, shortly after her last treatment at TFC, a portion of
Urbina’s balance was paid by insurance. Urbina also made a
series of monthly payments, the last of which she tendered in
August 2016. TFC advised Urbina that she had an
outstanding balance of $614.52 in a regularly distributed
notice dated September 23, 2016. Urbina did not respond to
that notice or to further notices and TFC forwarded the bill to
NBF for collection. According to NBF, it sent a letter to TFC
requesting that TFC verify the amount due. The following
day, without receiving a response from TFC, NBF sent
Urbina a collection notice seeking payment of $614.52 plus
$29.07 in interest.1
Urbina filed a complaint in the District of Nevada
alleging violations of the FDCPA, and moved for summary
judgment. In opposing Urbina’s motion, NBF admitted it
received an incorrect payment history from TFC and
mistakenly calculated interest beginning February 26, 2016
rather than August 12, 2016, which was the date of Urbina’s
final payment. Because NBF had charged too much interest
and attempted to collect more than Urbina owed, it was
undisputed that NBF violated the FDCPA. But in its
opposition to Urbina’s summary judgment motion, NBF
argued that it was entitled to the benefit of the FDCPA’s bona
fide error defense. NBF’s opposition was not styled as a
cross-motion; it argued that summary judgment should be
1
TFC did not add interest to Urbina’s past-due balance, but the
agreement TFC had with NBF allowed NBF to add interest on unpaid
accounts at the rate allowed by Nev. Rev. Stat. § 99.030. The district
court concluded that NBF properly collected interest at the statutory rate,
and Urbina does not contest this on appeal.
6 URBINA V. NAT’L BUS. FACTORS
entered in its favor pursuant to Federal Rule of Civil
Procedure 56(f).2
The district court concluded that NBF properly added
interest to the balance of Urbina’s account, that NBF violated
the FDCPA by improperly calculating the interest due, but
that NBF qualified for the bona fide error defense. The
district court denied Urbina’s motion and entered summary
judgment in favor of NBF. Urbina v. Nat’l Bus. Factors, Inc.
of Nev., 2019 WL 1767890 (D. Nev. 2019).
On appeal, Urbina argues that NBF does not qualify for
the bona fide error defense because it did not have adequate
procedures in place to prevent errors of the type that occurred
here. NBF counters that it reasonably relied on TFC’s
promise to provide accurate information pursuant to the
Collection Service Agreement. NBF also claims it followed
its standard practice after TFC assigned Urbina’s delinquent
account for collection, by requesting that TFC notify it of any
inaccuracies in the record of the delinquent account. NBF did
not retain a copy of the automatic response it claims it sent to
TFC and an example of NBF’s automatic response was not
produced until NBF opposed Urbina’s summary judgment
motion.
II.
We review de novo a district court’s decision to grant
summary judgment. Branch Banking & Tr. Co. v. D.M.S.I.,
2
In relevant part, Rule 56(f) states, “the court may grant summary
judgment for a nonmovant . . . or consider summary judgment on its own
after identifying for the parties material facts that may not be genuinely in
dispute.”
URBINA V. NAT’L BUS. FACTORS 7
LLC, 871 F.3d 751, 759 (9th Cir. 2017). Summary judgment
is appropriate when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). We determine whether
there are any genuine issues of material fact and whether the
district court correctly applied the relevant substantive law.
See Frudden v. Pilling, 877 F.3d 821, 828 (9th Cir. 2017). In
doing so, we view the evidence in the light most favorable to
the party against whom summary judgment was granted. Id.
III.
The district court ruled TFC’s contract with NBF to
provide “only accurate data” was a procedure NBF
reasonably adapted to avoid violating the FDCPA. Urbina
argues this was error.
Congress enacted the FDCPA in 1977 “to eliminate
abusive debt collection practices by debt collectors, to insure
that those debt collectors who refrain from using abusive debt
collection practices are not competitively disadvantaged, and
to promote consistent State action to protect consumers
against debt collection abuses.” 15 U.S.C. § 1692(e). The
FDCPA prohibits debt collectors from collecting “any
amount (including any interest, fee, charge, or expense
incidental to the principal obligation) unless such amount is
expressly authorized by the agreement creating the debt or
permitted by law.” Id. § 1692f(1). Debt collectors are
strictly liable for FDCPA violations, Donohue v. Quick
Collect, Inc., 592 F.3d 1027, 1030 (9th Cir. 2010), and a debt
collector who violates the FDCPA is liable for actual
damages, attorney’s fees and costs, and additional damages
not to exceed $1,000 per violation. 15 U.S.C. § 1692k. The
FDCPA is “broadly remedial,” and should be liberally
8 URBINA V. NAT’L BUS. FACTORS
construed in favor of consumers. McAdory v. M.N.S. &
Assocs., LLC, 952 F.3d 1089, 1092 (9th Cir. 2020).
To avoid liability, debt collectors may raise the limited
affirmative defense that their conduct was “not intentional
and resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid any
such error.” 15 U.S.C. § 1692k(c). The burden is on the debt
collector to prove this defense by a preponderance of the
evidence. Id.; McCollough v. Johnson, Rodenburg &
Lauinger, LLC, 637 F.3d 939, 948 (9th Cir. 2011).
The bona fide error defense requires a showing that the
debt collector: (1) violated the FDCPA unintentionally;
(2) the violation resulted from a bona fide error; and (3) the
debt collector maintained procedures reasonably adapted to
avoid the violation. Id. With respect to the first two factors,
the district court concluded that NBF violated the FDCPA
unintentionally and the violation resulted from a bona fide
error. The parties do not contest these two rulings.
With respect to the third factor, we have said that “[a]
debt collector is not entitled under the FDCPA to sit back and
wait until a creditor makes a mistake and then institute
procedures to prevent a recurrence.” Reichert v. Nat’l Credit
Sys., Inc., 531 F.3d 1002, 1007 (9th Cir. 2008). Instead, “the
debt collector has an affirmative obligation to maintain
procedures designed to avoid discoverable errors, including,
but not limited to, errors in calculation and itemization.” Id.
Debt collectors seeking to take advantage of the bona fide
error defense must explain “the manner in which [their
procedures] were adapted to avoid the error,” id.; the bona
fide error defense does not shield debt collectors who
unreasonably rely on creditors’ representations. Clark v.
URBINA V. NAT’L BUS. FACTORS 9
Capital Credit & Collection Serv., Inc., 460 F.3d 1162, 1177
(9th Cir. 2006).
We have previously rejected the contention that
unquestioned reliance on a creditor’s information can suffice
as a bona fide defense. Reichert, 531 F.3d at 1006. In
Reichert, a debt collector attempted to collect attorney’s fees
on behalf of a landlord despite state law that clearly
prohibited the collection of such fees. The debt collector
admitted the mistake but argued it was entitled to the benefit
of the bona fide error defense because the landlord had
submitted accurate information in the past. Id. We disagreed
and held that the debt collector’s reliance on the creditor’s
history of providing accurate information was not a procedure
reasonably adapted to avoid receiving inaccurate information.
Id. at 1007. Citing the Seventh Circuit’s opinion in Jenkins
v. Heintz, 124 F.3d 824, 834–35 (7th Cir. 1997), we described
several “elaborate procedures” that enabled the debt collector
in that case to successfully invoke the bona fide error defense:
(1) “a requirement that the creditor verify under oath that
each charge was accurate,” (2) “the publication of an
in-house fair debt compliance manual, updated regularly and
supplied to each firm employee,” (3) “training seminars for
firm employees collecting consumer debts,” and (4) “an
eight-step, highly detailed pre-litigation review process to
ensure accuracy and to review the work of firm employees to
avoid violating the Act.” Reichert, 531 F.3d at 1006.
The Supreme Court addressed the bona fide error defense
in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA,
559 U.S. 573, 587 (2010). There, the Court held that a debt
collector who made a legal error in interpreting the FDCPA
did not qualify for the bona fide error defense. More
important for resolving this appeal, the Court contrasted legal
10 URBINA V. NAT’L BUS. FACTORS
errors that do not qualify for the defense, with reasonably
adapted routine procedures that might. The Court explained:
“[t]he dictionary defines ‘procedure’ as ‘a
series of steps followed in a regular orderly
definite way.’ . . . In that light, the statutory
phrase is more naturally read to apply to
processes that have mechanical or other such
‘regular orderly’ steps to avoid mistakes.”
Id. (internal citations omitted).
Jerman reasoned that “the broad statutory requirement of
procedures reasonably designed to avoid ‘any’ bona fide error
indicates that the relevant procedures are ones that help to
avoid errors like clerical or factual mistakes.” Id. (emphasis
added). The Eleventh Circuit followed this lead when it
denied a debt collector’s claim, nearly identical to NBF’s
here, that an engagement contract obligating a creditor-client
“to present only accurate information on debts” qualified as
a procedure reasonably adapted to avoid erroneous interest
calculations. Owen v. I.C. Sys., Inc., 629 F.3d 1263, 1274–75
(11th Cir. 2011). The Eleventh Circuit observed that the debt
collector’s “form contract” was signed four years before the
subject debt was sent for collection, and ruled that employing
a one-time form contract with a creditor-client, then blindly
relying on the creditor to send only valid debts, is not a
procedure designed to avoid erroneous interest charges
resulting from an inaccurate payment history. Id.; see also
Turner v. Firestone Tire & Rubber Co., 537 F.2d 1296, 1298
(5th Cir. 1976) (“While [a clerical error] is one that is easy to
commit, it is also the type of error that can be easily detected
by implementation of an inexpensive screening procedure.”).
URBINA V. NAT’L BUS. FACTORS 11
The Eighth Circuit has cautioned that whether a procedure
is sufficient to qualify for the bona fide error defense is a
“fact-intensive inquiry,” Wilhelm v. Credico, Inc., 519 F.3d
416, 421 (8th Cir. 2008), and the Seventh Circuit echoed that
view in Leeb v. Nationwide Credit Corp., 806 F.3d 895, 900
n.3 (7th Cir. 2015) (declining to “volunteer[] sweeping
generalizations” about adequate procedures because “[s]uch
matters are better resolved on a case-by-case basis.” (quoting
Owen, 629 F.3d at 1277)). We agree that the particular facts
of these cases will dictate the outcome, but we also recognize
that the procedures our sister circuits have approved for
catching errors in creditor-clients’ data are significantly more
likely to catch errors than a form contract requiring customers
to provide only accurate information. See Abdollahzadeh v.
Mandarich Law Grp., LLP, 922 F.3d 810, 818 (7th Cir. 2019)
(finding procedure sufficient where bill collector “relied on
account information provided by its client” but subjected it to
“an automated scrub that culled out-of-statute debts,” the
client supplied an affidavit attesting to the accuracy of its
information, and the debt collector’s attorney verified the
statute of limitation had not expired); Wilhelm, 519 F.3d at
421 (approving bona fide error defense where debt collector
received specific instructions to segregate principal and
interest from creditor-client to avoid charging interest on
interest); Johnson v. Riddle, 443 F.3d 723, 730 (10th Cir.
2006) (approving of “[s]ending employees and staff to
training seminars or subjecting employees and staff to
compliance testing”).
Here, NBF’s collection service contract with TFC is
similar to the contract the Eleventh Circuit found insufficient
to qualify for the bona fide error defense in Owen. The
engagement contract also stands in contrast to the procedures
cited with approval in Reichert. The procedures that have
12 URBINA V. NAT’L BUS. FACTORS
qualified for the bona fide error defense were consistently
applied by collectors on a debt-by-debt basis; they do not
include one-time agreements committing creditor-clients to
provide accurate information that are later acted upon without
question.
The district court’s order granting summary judgment in
favor of NBF relied heavily on McCollough, 637 F.3d at 948,
but that case is distinguishable. McCollough denied a law
firm’s attempt to invoke the bona fide error defense because
the firm unreasonably relied on a file transmitted by another
debt collector and, among other things, failed to recognize
that the relevant collection service agreement actually
disclaimed the accuracy or validity of the creditor-client’s
data. Id. at 949. The district court also relied on Turner v.
J.V.D.B. & Assocs., Inc., 330 F.3d 991, 996 (7th Cir. 2003),
for the proposition that “where there is an agreement that the
creditor-client would only provide reliable information, there
is evidence of reasonable reliance on creditor information.”
But in Turner, the Seventh Circuit did not squarely consider
whether such evidence would qualify for the bona fide error
defense; it reversed a district court’s order granting summary
judgment on a different issue and remanded the case to the
trial court. In dicta, the Seventh Circuit observed that if the
bona fide error defense was asserted on remand, an agreement
to provide reliable information might suffice. Notably, the
trial court concluded on remand, as we do here, that the debt
collector’s reliance on its clients to provide accurate
information “[did] not in any way compare to the types of
procedures and systems found to qualify for the bona fide
error defense.” Turner v. J.V.D.B. & Assocs., Inc., 318 F.
Supp. 2d 681, 686 (N.D. Ill. 2004). Neither McCullough nor
Turner supports NBF’s defense.
URBINA V. NAT’L BUS. FACTORS 13
NBF’s fallback argument is that even if its collection
service contract was insufficient to qualify for the bona fide
error defense, it separately qualifies because it sends its
creditor-clients follow up requests seeking verification of the
accuracy of their information. This is closer to the mark, but
it still falls short because it is uncontested that NBF did not
wait for a response from TFC before it attempted to collect
from Urbina. Because NBF does not argue that it routinely
waits for creditor-clients to respond before sending collection
notices to debtors, NBF fails to show that its practice of
requesting account verification from its clients is genuinely
calculated to catch errors of the sort that occurred here.
Neither of NBF’s practices qualifies for the bona fide error
defense.3
We reverse the district court’s order granting summary
judgment in favor of NBF and remand to the district court for
further proceedings.
REVERSED AND REMANDED.
Appellee to bear costs.
3
In discovery, NBF did not produce the follow up request, nor was
it able to prove that TFC received a letter similar to the example it
produced in opposition to Urbina’s motion for summary judgment.
Urbina objected to the admissibility of the sample follow up letter. We do
not decide whether the follow up letter was admissible because NBF’s
argument fails even if the follow up letter is considered.