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The Supreme Court today decided that the Fair Debt Collection Practices Act, passed in 1977 to prohibit dishonest or abusive behavior by debt collectors, allows debtors to sue collection agencies even when the agencies misunderstand the law.

In a 7–2 decision, the Court held that a misunderstanding of the law is not a defense against a suit, even though the law does forgive some mistakes by the collection agency.

The Fair Debt Collection Act prevents collection agencies from misrepresenting themselves, using abusive language, making threats of violence, or contacting debtors at inconvenient times, but it allows the agencies to argue that an act was a "bona fide error" and escape liability. In the ruling today, the Supreme Court held that a misunderstanding of the law's meaning is not an excusable error.

The case arose after Countrywide Home Loans hired a law firm, Carlisle, McNellie, Rini, Kramer & Ulrich, to attempt to collect on an outstanding mortgage debt by Karen L. Jerman or begin foreclosure. The Carlisle's first letter to Jerman told her that she had 30 days to contest the debt in writing, or the debt would be presumed valid. While the Fair Debt Collection Act does require a similar notice, it does not require that the dispute of the debt be in writing. On the basis of that discrepancy, Jerman filed suit against the firm, asking for damages under the Fair Debt Collection Act. Carlisle argued that it had misunderstood the law and could not be held responsible under the law's "bona fide error" provision.

After today's Supreme Court decision, the case will return to the lower courts to determine whether Carlisle's mistake violates the act's protections.