SUPREME COURT RULING GOES AGAINST COLLECTION INDUSTRY

A Supreme Court decision yesterday could make it easier for consumers to sue collectors for sending erroneous collection notices, Collections & Credit Risk.com reported today.

The Court, in a 7-2 opinion, ruled that collectors can't protect themselves from such lawsuits simply by stating they made a legal error when sending a notice.

At issue were the actions of an Ohio law firm, Carlisle, McNellie, Rini, Kramer & Ulrich Co., that started foreclosure proceedings on behalf of Countrywide Home Loans Inc. The homeowner in the case, Karen Jerman, disputed that the debt existed. Countrywide later confirmed that Jerman had paid the debt, and the law firm withdrew the foreclosure lawsuit.

Jerman then sued the law firm, arguing that it violated the Fair Debt Collection Practices Act (FDCPA) by contending in the foreclosure suit that Jerman's alleged debt would be assumed to be valid unless she contested it in writing.

A lower court agreed with Jerman that the firm violated the FDCPA, but ruled that the law firm was shielded from liability because the violation wasn't intentional and was the result of a bona fide legal error. Justice Sonia Sotomayor and the court disagreed, ruling that Congress hadn't explicitly provided a mistake-of-law defense to collectors.