Debt Collectors Cannot Blame Their Mistakes on Creditors, Federal Appeals Court Rules

July 9, 2008

Debt Collectors Cannot Blame Their Mistakes on Creditors, Federal Appeals Court Rules

Public Citizen Wins Case and Strengthens Protections for Consumers

WASHINGTON, D.C. – In a ruling that could help consumers nationwide, a federal appeals court this week held that debt collection agencies cannot shirk responsibility for abuses by blaming them on creditors.

In an opinion issued late Monday by Judge Mary Schroeder, the U.S. Court of Appeals for the Ninth Circuit ruled that the federal Fair Debt Collection Practices Act requires debt collectors to prove that they have used detailed procedures to ensure that they do not take actions that are prohibited by the act, such as harassing consumers, overbilling or making deceptive statements.

“A debt collector is not entitled to just sit back and wait until a creditor makes a mistake and then institute procedures to prevent an occurrence,” the court ruled.

The case involved Arizona resident Robert Reichert, who was contacted by a debt collector about an outstanding bill from his old apartment complex. The debt collector, National Credit Systems Inc., had tacked on charges for “attorney’s fees,” but couldn’t explain where the charges came from. The collection agency claimed that it had overlooked the error because the landlord-creditor had always provided accurate information in the past. The court rejected that defense, holding that debt collectors must show detailed preventive procedures to escape liability for their actions.

“The court’s ruling will compel debt collectors to police themselves more effectively,” said Deepak Gupta, an attorney for Public Citizen who argued the case. “The ruling is very significant at a time in which increasing numbers of Americans are being contacted by debt collectors and abuses are on the rise.”

To read the decision in the case, Reichert v. National Credit Systems, go to: https://www.citizen.org/sites/default/files/0615503.pdfopenelement.