In Owen v. I.C. System, Inc. — F.3d —-, 2011 WL 43525 (11th Cir. 2011), the Court of Appeals for the Eleventh Circuit gave guidance in the post-Jerman world on the application of the bona-fide error defense. The Court explained that a ‘legal error’ under Jerman actually requires some exercise of legal judgment, explaining:
There is no evidence, nor does Owen contend, that ICS harbored a belief that it could lawfully operate within the bounds of the FDCPA while attempting to collect interest charges that Owen never agreed to. There is no evidence that ICS exercised any legal judgment as to the interest charges; rather, ICS indiscriminately accepted AAA’s interest charges as factually accurate and proceeded to collect them. Because ICS’s errors did not constitute mistakes of law, the Jerman decision does not preclude ICS’s bona fide error defense.
Accordingly, the Kendra court, having concluded that the error could be the subject of the defense, ruled on whether the debt collector’s defense succeeded. The Court of Appeals concluded that it did not, explaining:
In reaching our conclusion that ICS’s procedures (as presented in the limited record here) are not sufficient under the third element of the bona fide error defense, we also recognize that debt collectors operate under time and resource constraints. Moreover, we agree with ICS that the FDCPA does not require debt collectors to independently investigate and verify the validity of a debt to qualify for the bona fide error defense. See 15 U.S.C. § 1692k(c); see also Hyman v. Tate, 362 F.3d 965, 968 (7th Cir.2004); Jenkins v. Heintz, 124 F.3d 824, 834-35 (7th Cir.1997); Smith v. Transworld Sys., Inc., 953 F.2d 1025, 1032 (6th Cir.1992). However, to qualify for the bona fide error defense, the debt collector has an affirmative statutory obligation to maintain procedures reasonably adapted to avoid readily discoverable errors, such as the interest errors here. See 15 U.S.C. § 1692e(2)(A) (prohibiting the false representation of “the character, amount, or legal status of any debt”); id. § 1692f(1) (prohibiting “[t]he collection of 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”). A debt collector does not fulfill this affirmative obligation by delegating it entirely to creditors, such as AAA, whose actions are not even regulated by the FDCPA. See 15 U.S.C. § 1692k(a) (subjecting debt collectors to civil liability for FDCPA violations). . . A contrary conclusion would portend consequences not intended by Congress when it enacted the FDCPA. In listing the statutory purposes of the FDCPA, Congress identified the need “to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” 15 U.S.C. § 1692(e). This purpose would be completely frustrated were we to accept ICS’s argument that its one-time instruction to AAA-to refer only debts “validly due and owing”-shields it from liability. Such reasoning would allow debt collectors to make an end-run around statutory provisions that ensure accurate collection practices merely by inserting boilerplate language in its contracts with creditors. Debt collectors who presently maintain internal procedures to avoid FDCPA errors would be incentivized to scrap these measures altogether, since full immunity could be guaranteed by placing the onus of accuracy on creditors. This would precipitate a race to the bottom among debt collectors, rendering the FDCPA a dead letter.