629 F.3d 1263 (11th Cir. 2011), 09-15464, Owen v. I.C. System, Inc.

Docket Nº:09-15464.
Citation:629 F.3d 1263
Opinion Judge:HULL, Circuit Judge:
Party Name:Kendra OWEN, Plaintiff-Appellant, v. I.C. SYSTEM, INC., Defendant-Appellee.
Attorney:Bret Reed Hobson (Court-Appointed), Bondurant Mixon & Elmore, LLP, Atlanta, GA, for Owen. Jeffery R. Saxby, Epstein Becker & Green, Atlanta, GA, for Defendant-Appellee.
Judge Panel:Before HULL and MARCUS, Circuit Judges, and WHITTEMORE,[*] District Judge.
Case Date:January 07, 2011
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1263

629 F.3d 1263 (11th Cir. 2011)

Kendra OWEN, Plaintiff-Appellant,

v.

I.C. SYSTEM, INC., Defendant-Appellee.

No. 09-15464.

United States Court of Appeals, Eleventh Circuit

January 7, 2011

Page 1264

[Copyrighted Material Omitted]

Page 1265

Bret Reed Hobson (Court-Appointed), Bondurant Mixon & Elmore, LLP, Atlanta, GA, for Owen.

Jeffery R. Saxby, Epstein Becker & Green, Atlanta, GA, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before HULL and MARCUS, Circuit Judges, and WHITTEMORE,[*] District Judge.

HULL, Circuit Judge:

Plaintiff Kendra J. Owen (" Owen" ) sued I.C. System, Inc. (" ICS" ), a debt collection company, for alleged violations of the Fair Debt Collection Practices Act (" FDCPA" ), 15 U.S. C. § 1692 et seq. The district court denied Owen's motion for summary judgment and granted ICS's motion for summary judgment based on its affirmative defense of " bona fide error" under 15 U.S. C. § 1692k(c). Plaintiff appeals, contending that ICS did not maintain " procedures reasonably adapted to avoid" errors, as required by § 1692k(c), and thus cannot invoke the bona fide error defense as a matter of law. After review and oral argument, we reverse.

I. FACTUAL BACKGROUND

A. Plaintiff's Debt

In July 2006, Plaintiff Owen brought her cat to All About Animals Veterinary Services, P.C. (" AAA" ) for medical treatment. Six years prior, Owen registered her cat at AAA and signed a one-page registration form (" the agreement" ) stating, in relevant part, that she would pay interest at " 1.5% per month or 18% per year" and " reasonable collection fees" :

In the event this account goes to collection, I understand I am responsible for any and all interest charges incurred and reasonable collection fees that will be added. Interest charges accrue at the rate of 1.5% per month or 18% per year.

On July 24, 2006, AAA charged Owen $780.10 for veterinary services, $100 of which Owen paid. Because Owen could

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not pay the remaining balance, her husband signed a promissory note that day pledging that he and Owen would pay $100 every two weeks until the bill was paid in full. Owen made two more payments of $100, leaving a balance of $480.10.

Owen failed to meet her next $100 payment obligation. On September 27, 2006, AAA imposed a 1.5% interest charge ($7.20) on Owen's balance of $480.10, pursuant to her agreement. This made Owen's balance $487.30. On September 30, 2006, Owen received an additional $42.79 in veterinary services and made a $145 payment. This left Owen's balance as $385.09.

Owen made no payment thereafter, and AAA periodically imposed 1.5% interest charges. The unpaid interest charges were added to the running balance due, resulting in Owen being charged interest on previous interest due. Owen's agreement stated that " interest charges accrue at the rate of 1.5% per month or 18% per year," which reflects a simple interest rate of 1.5% over 12 periods (1.5% x 12 = 18%). Owen, however, was charged compound interest ( i.e., interest on interest).1

Additionally, AAA levied a 33% collection charge, along with a " 7% Interest" fee. The basis of this latter fee is somewhat unclear, but it does not reflect any of the authorized charges mentioned in Owen's agreement. In a deposition, AAA representative Susan Ellis stated that the " 7% Interest" fee was " the interest that [ICS] ha[s] always told us to put on" when AAA places accounts for collection. She further testified that this practice was " what I've always been taught from the previous [AAA] managers."

The following chart reflects AAA's debit and credit entries on Owen's account statement:

Date Description Charges Payments Run. Bal.
7/24/06 Veterinary Services $780.10 $780.10
7/24/06 Cash $100.00 $680.10
8/08/06 Check $100.00 $580.10
8/25/06 Check $100.00 $480.10
9/27/06 Finance Charge 2 $ 7.20 $487.30
9/30/06 Veterinary Services $ 42.79 $530.09
9/30/06 Cash $145.00 $385.09
11/4/06 Finance Charge $ 5.78 $390.87
12/29/06 Finance Charge $ 5.86 $396.73
2/9/07 Finance Charge $ 5.95 $402.68
3/27/07 Finance Charge $ 6.04 $408.72
3/27/07 33% Collect Charge $134.87 $543.59
3/27/07 7% Interest $ 28.61 $572.20
B. ICS's Collection On March 27, 2007, AAA referred Plaintiff Owen's outstanding debt to Defendant Page 1267 ICS for collection. Using ICS's Internet web page, AAA communicated the debt to ICS as $408.72 in principal, a $134.87 collection charge, and a $28.61 interest fee. These three amounts totaled $572.20. ICS is a debt collector that must comply with the provisions of the FDCPA. 3 AAA's contract with ICS (1) provided that AAA would provide accurate information and place with ICS only debts that were " validly due and owing" and (2) reserved to ICS the right to modify or eliminate interest rates and other charges if ICS deemed it necessary to comply with the law:

We need accurate account information and proper authorization. Provide accurate information on each account and promptly report any payments you receive on accounts placed with us. Place only amounts over $25 that are validly due and owing by the debtor indicated. This applies to the principal, any charges added to the principal, and any rate of interest you request to be accrued. We may limit the rate of interest or other charges you have added to an account or refuse to add any if we believe we need to do so to operate lawfully. You must ensure that you have any consents & /or necessary authorizations for you to share information with us.

(emphasis added). For its services, ICS would receive 33% of all amounts collected on each consumer account. On March 28, 2007, ICS sent a letter to Owen notifying her of its role as debt collector and stating the total amount owed as $572.20, the figure provided by AAA. ICS categorized this debt figure as $408.72 " Principal," a $134.87 " Collection Charge," and $28.61 " Interest." This $408.72 " Principal" incorporated both principal and the 1.5% interest charges that AAA had previously added to the account. The $134.87 " Collection Charge" constituted a 33% levy on the $408.72 " Principal." Meanwhile, the $28.61 " Interest" charge represented a " 7% Interest" fee on the $408.72 " Principal." ICS's March 28 letter notified Owen that " [i]nterest at the rate of 7.00% annually is being added to this delinquent account." The letter further instructed Owen that " I.C. System will forward the account information to the national credit reporting agencies if you fail to fulfill the terms of your credit obligations." On April 13, 2007, Owen sent a letter to ICS stating, " I dispute the amount you allege is owed," though she did not elaborate on any alleged discrepancies. In accordance with FDCPA provisions, ICS sent a letter to AAA notifying it that Plaintiff Owen disputed the amount of her debt.4 ICS sought verification of the amount owed and instructed AAA to send a " separate explanation and invoice." On May 1, 2007, AAA sent these documents to ICS: (a) a cover letter describing Page 1268 the debt and prior attempts to collect; (b) an estimate of veterinary services to be performed; (c) a medical record detailing procedures performed and client communications; (d) the promissory note signed by Owen's husband; (e) Owen's agreement with AAA specifying that she would pay interest at 1.5% per month or 18% per annum; and (f) Owen's account statement listing all individual charges (for services, finance charges, collection charges, and a " 7% Interest" fee) and payments, as shown in the chart above. These last two documents on their face revealed at least two apparent discrepancies: (1) AAA's account statement shows four separate compound interest charges on Owen's running balance of combined principal and interest, instead of the 1.5% simple interest specified in Owen's agreement and (2) AAA's account statement shows that on March 27, 2007, an additional " 7% Interest" fee was added to Owen's balance, though this fee was not authorized by Owen's agreement and though 1.5% monthly finance charges had been added in November and December 2006 and February and March 2007. Despite these facial inconsistencies, there is nothing in the current record indicating that ICS consulted with AAA regarding these unauthorized charges, nor is there any evidence that ICS itself reviewed the documents before forwarding them to Owen. In a May 9, 2007 letter, ICS forwarded these documents to Owen, notifying her that she must contact ICS's offices immediately if she continued to dispute the amount of her debt:

Your creditor, All About Animals, has provided the attached information, substantiating your responsibility for payment of the above referenced debt. If you still question that responsibility, contact our office immediately, otherwise your remittance of $574.665 is required.

Additionally, ICS's May 9 letter informed Owen again that, if the debt were not paid, ICS would notify national credit reporting agencies of this delinquency:

We forward our collection experience, regarding the debts that we handle, to several national credit reporting agencies. As a result, this debt and your dispute regarding the claimed amount owed, may remain in your credit history for up to seven years. Paying this debt NOW, [sic] will minimize the impact of its delinquency on that credit history. You have the right to inspect your credit rating in accordance with federal law.

Despite ICS's request, Owen did not contact ICS. In a deposition, Owen later stated that she did not further dispute these charges with ICS because...

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