bona fide

Debt Collector Succeeds with FDCPA Bona Fide Error Defense

The United States District Court for the Southern District of Alabama recently granted a Motion for Summary Judgment in favor of a defendant debt collection agency.  In Robert L. Arnold v. Bayview Loan Servicing, LLC, et al., the plaintiff filed suit against the collection agency for multiple FDCPA violations.  Arnold fell behind on his mortgage payments and declared bankruptcy in 2012, under which the judge granted a discharge for the mortgage.  In January 2013, Arnold received written notification that the mortgage loan servicing had been transferred to Bayview.  Bayview was well aware of the default and that the debt had been discharged in bankruptcy.  Upon receipt of the account, Bayview started the foreclosure process, and purchased the property for most of the amount of the outstanding principal on Arnold’s loan.  While the account was properly coded in Bayview’s system upon transfer, and no billing statements were produced, in December 2013, ten months after the transfer, two billing statements were sent to Arnold.  The statements reflected the outstanding balance; they did not reference the bankruptcy discharge, and they did not reference a credit for the foreclosure sale.

Bayview sought summary judgment based solely on the bona fide error defense.  To succeed on this defense, Bayview must show “a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such an error.”  This defense is not available for mistakes of law or misinterpretations of the FDCPA, but instead “to protect against liability for errors like clerical or factual mistakes.”  See Edwards v. Niagara Credit Solutions, Inc.

The court found Bayview sufficiently demonstrated that the December 2013 mailings were unintentional based on the following:

  1. Arnold’s loan had been coded with a foreclosure man code when Bayview assumed servicing responsibilities, effectively suppressing all billing statements;
  2. Bayview sent no billing statements to Arnold between February 2013 and November 2013;
  3. The Bayview employee who performed a pre-foreclosure review of Arnold’s loan was bound to follow a Bayview checklist that did not call for changing the man code or issuing billing statements;
  4. Nothing in the checklist or employee comments suggested that this individual intended to change the man code or reactivate Arnold’s loan;
  5. The man code was changed anyway, even though Bayview had no reason to do so in its pre-foreclosure review;
  6. Bayview ceased communications to Arnold when it discovered the error; and
  7. Bayview provides extensive, ongoing training to employees in the area of FDCPA compliance.

The Court also concluded that Bayview’s violation was in good faith in that it properly relied on the foreclosure code to suppress monthly statements to Arnold, and that it had no reason to believe that the man code would be changed during the pre-foreclosure review process.  Furthermore, Bayview had provided appropriate training and checklists to its employees concerning pre-foreclosure review.

Finally, the Court also concluded that Bayview maintained policies and procedures to avoid readily discoverable errors.  Bayview had general training procedures and specific procedures for pre-foreclosure review.  It also had ongoing FDCPA compliance training for its employees.

This case demonstrates the importance for debt collection agencies to have clear policies and procedures for FDCPA compliance, as well as ongoing training to reinforce the implementation of these policies and procedures.

For more information on this topic or questions regarding your FDCPA policies and procedures, please contact Stephanie Strickler at sstrickler@messerstrickler.com or at 312-334-3465.

Employment Law Tip for Illinois Employers #3 Salary Deductions for Absences – Part 1

The Fair Labor Standards Act (“FLSA”) dictates how and when employers can make deductions from their employees’ pay.  Of course, there are differences when you are dealing with an exempt versus a non-exempt employee.  For the purposes of this blog entry, we will only discuss deductions made to the salaries of exempt employees.

Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees and certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis of more than $455 per week. Exempt status is not determined by job title; an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s regulations. 

As discussed in my first blog containing the 1st tip for Illinois employers, there are restrictions and regulations regarding when and how an employer can deduct from employee’s pay when it comes to damaged or lost equipment. Employers need to be aware that there are additional restrictions regarding deductions, specifically those when an employee misses time from work for illness, vacation or personal reasons.

Deductions from pay are permissible when an exempt employee is 1) absent from work for one or more full days for personal reasons other than sickness or disability; 2) for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; 3)  to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; 4) or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

Oftentimes employers are unclear whether they can deduct from an exempt employees pay if they are absent from work   When an employee misses a full day or more of work due to personal reasons, there is no issue with an employer deducting pay from the employee’s salary for that time missed.  Keep in mind, employers must ensure that time is accurately documented pertaining to an employee’s use of vacation/personal time pursuant to the employer’s policy; where an employee has available paid time off (“PTO”)(including vacation or personal time), those days missed should be deducted first from that employee’s available PTO.  Also, an employer is permitted to deduct from time missed for any reason (including illness) if that employee has not yet qualified for participation in the employer’s PTO plan.  Although there is no bright line rule regarding timing to qualify for an employer’s sick/vacation leave plan, the Department of Labor has found a one year probationary period to be reasonable.  For further reference see, http://www.dol.gov/whd/opinion/FLSA/2006/2006_09_14_32_FLSA.htm

If an employer has a bona fide plan, policy or practice of providing defined sick days to its employees, that has been communicated to eligible employees and the employee has exhausted all of the sick days available under that bona fide plan, policy or practice, it is permissible for an employer to deduct from that employees salary for a full day missed from work due to illness or disability.  If an employer does not have a bona fide plan, policy or practice of providing its employees with paid sick days, then it is not permissible for the employer to deduct from an exempt employees salary for time missed due to illness or disability.  Of course, oftentimes there are issues determining whether an employer’s policy will be considered “bona fide”.   Stay tuned for my next blog regarding what constitutes a bona fide plan, policy or practice and the ramifications of non-compliance with the above discussed regulation of the FLSA.

There are many issues to consider when determining whether or not you can deduct from an exempt employees salary for missing work.  For more information on this topic or questions regarding any further employment related matters, please contact Dana Perminas, at 312-334-3474 or dperminas@messerstrickler.com for more information.