Mercedes Urbina v. National Business Factors Inc. ( 2020 )

FILED
NOT FOR PUBLICATION
AUG 17 2020
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MERCEDES URBINA, No. 19-16055
Plaintiff-Appellant, D.C. No. 3:17-cv-00385-WGC
v.
MEMORANDUM*
NATIONAL BUSINESS FACTORS INC.,
Defendant-Appellee.
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
Before: TASHIMA and CHRISTEN, Circuit Judges, and BATAILLON,*** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
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.
Mercedes Urbina appeals the district court’s order granting summary
judgment for National Business Factors, Inc. (NBF), a debt collector. We have
jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse. Because the parties are
familiar with the facts, we recite them only as necessary to resolve the issues on
appeal.
The district court granted summary judgment for NBF because it concluded
that NBF qualified for the bona fide error defense. To assert a bona fide error
defense, the debt collector must prove that: (1) it violated the FDCPA
unintentionally; (2) the violation resulted from a bona fide error; and (3) it
maintained procedures reasonably adapted to avoid the violation. McCollough v.
Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939, 948 (9th Cir. 2011) (citing
15 U.S.C. § 1692k(c)).
The parties do not dispute that NBF unintentionally violated the FDCPA
when it calculated interest on Urbina’s debt owed to the Tahoe Fracture Clinic
(TFC). At issue here is whether NBF maintained procedures reasonably adapted to
avoid this violation. Reviewing de novo, Branch Banking & Tr. Co. v. D.M.S.I.,
LLC, 871 F.3d 751, 759 (9th Cir. 2017), we conclude that it did not.
TFC contracted NBF for debt collection services in 2014. Under TFC and
NBF’s exclusive agreement, NBF could add interest charges on unpaid collections
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at the statutorily allowed rate. The agreement required TFC to refer outstanding
debts to NBF for collection “with only accurate data and that the balances reflect
legitimate, enforceable obligations of the consumer.”
NBF argues that this procedure was reasonably adapted to avoid violations
of the FDCPA. We disagree. “To qualify for the bona fide error defense under the
FDCPA, 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.” Reichert v. Nat’l Credit Sys., Inc., 531 F.3d 1002,
1007 (9th Cir. 2008); Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d
1162, 1177 (9th Cir. 2006) (no defense for debt collector “whose reliance on the
creditor’s representation is unreasonable”).
The district court erred by concluding as a matter of law that the boilerplate
agreement between TFC and NBF was sufficient to establish a bona fide error
defense. This procedure effectively outsourced NBF’s statutory duty under the
FDCPA. If this practice were sufficient, the FDCPA would be a dead letter. Even
if NBF could show that TFC has a sterling history of providing accurate
information, we have previously rejected unquestioned reliance on a creditor’s
information as a bona fide defense. Reichert, 531 F.3d at 1007 (holding that a
history of providing reliable information cannot “establish that reliance in the
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present case was reasonable and act as a substitute for the maintenance of adequate
procedures to avoid future mistakes”) (emphasis added).
In Reichert, we described several examples of procedures that may qualify
for the bona fide error defense. 531 F.3d at 1006 (quoting Jenkins v. Heintz, 124
F.3d 824, 834–35 (7th Cir. 1997)). NBF’s agreement with TFC is significantly
more lax. TFC’s 2014 promise to provide “accurate data,” made before a single
debt was reported by TFC to NBF, and four years before the operative facts of this
case occurred, is not a reasonable procedure.
The district court relied on Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991,
996 (7th Cir. 2003). We are not bound by Turner and find it unpersuasive. Turner
mentioned in passing that an agreement to provide reliable information might allow
a debt collector to show bona fide error. Id. But there was no boilerplate
agreement between the parties in Turner, and on remand, the district court
concluded that relying on creditor-clients to provide accurate information does not
suffice to establish a bona fide error defense. Turner v. J.V.D.B. & Assocs., Inc.,
318 F. Supp. 2d 681, 686–87 (N.D. Ill. 2004).
NBF also mailed Urbina a collection notice with incorrect interest
calculations only a day after receiving the file, but this procedure did not allow
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time to receive a response to the authentication letter, and therefore fails to qualify
as a procedure reasonably adapted to avoid the violation. Appellee to bear costs.
REVERSED AND REMANDED.
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