A Georgia woman will be allowed to sue debt collector I.C. System for interest fees she paid on veterinary bills, a three-judge appellate panel has ruled, reversing a federal judge's 2009 decision.
Kendra Owen had logged more than $820 in medical care for her cat at All About Animals Veterinary Services in 2006. Under terms of her account with the clinic, she agreed to pay interest at 1.5% per month or 18% per year and "reasonable collection fees" if she missed payments.
Her account went into default that same year and the clinic began adding 1.5% monthly interest charges. The unpaid interest charges were added to the running past-due balance, meaning Owen was being charged compounded interest - fees on previous interest due, according to the ruling.
When the clinic referred Owen's account to I.C. System in 2007, the clinic added a 33% collection charge and a 7% interest fee on top of several months of finance charges. Owen disputed the charges and filed suit in March 2008 when the unauthorized charges had not been removed.
I.C. System filed a motion for summary judgment, stating that the charges were not entirely proper but that it was not liable because the veterinary office had cause the error through a "clerical mistake." The agency argued the "bona fide error" defense, stating that it does not have to independently investigate the accuracy of the charges it collects and was entitled to rely on the clinic's representations.
A federal judge agreed and awarded summary judgment to I.C. System in September 2009, but Owen appealed to the 11th Circuit (Ga.) Court, contending that the agency can only claim bona fide error if it has procedures in place that should have caught the unfair charges.
"We hold only that ICS's limited procedures placed in this record were not reasonably adapted to avoid the type of interest errors here," Judge Frank Hull wrote for the court.
