9th Circuit Holds That Law Firm’s Attempts to Garnish Social Security Benefits Were Not Bona Fide Error Under FDCPA

The U.S. Court of Appeals for the Ninth Circuit recently held that a law firm’s attempts to garnish Social Security benefits did not qualify for the FDCPA’s bona fide error defense because the firm’s mistaken understanding that some of these benefits could be garnished was not objectively reasonable.

As background, after a homeowners’ association obtained a money judgment, in a separate lawsuit, against the plaintiff-debtor, the defendant–law firm filed a writ of garnishment with the defendant-bank to collect on that judgment.  As a result, the bank withheld funds (including Social Security benefits) in the plaintiff’s account until the writ of garnishment was eventually quashed. 

On appeal, the law firm conceded that it had mistakenly sought to garnish the plaintiff’s Social Security benefits.  Although this conduct would have otherwise violated the FDCPA, the law firm contended that it could not be held liable because it had made a “bona fide error,” which the FDCPA recognizes as a defense to liability.  The district court agreed and granted summary judgment in the law firm’s favor.

The Ninth Circuit reversed, holding that the law firm’s mistake (the purported bona fide error) was not objectively reasonable as a matter of law.  As the court observed, the law firm continued to seek garnishment from an account for months after it knew that the account contained only funds from the debtor’s Social Security benefits.  The Ninth Circuit further explained that, because federal law (including clear federal regulations) has long protected Social Security benefits from garnishment, the law firm’s asserted mistaken position that federal regulation protected only two months’ worth of benefits “lacked any objectively reasonable basis in law.” 

The Ninth Circuit therefore remanded the case, allowing the plaintiff to maintain his FDCPA claim against the law firm.  The Ninth Circuit, however, affirmed the district court’s dismissal of all the plaintiff’s other claims, including his claims against the bank.