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Fourth Circuit boosts protections for bill collectors

A lawyer accused of unfair debt collection is protected by the “bona fide error defense,” even though he persisted in seeking attorney fees under an invalid contract, a federal appeals court panel has ruled.

The 4th U.S. Circuit Court of Appeals affirmed a court victory for an Alexandria lawyer who sought to collect for nursing home services from a patient’s family members. The unpublished decision in McLean v. Ray bolsters the holding in an unpublished 1999 opinion protecting debt collectors as long as they have a “colorable factual basis” for their claims.

The original contract with the nursing home provided for attorney’s fees in any collections action, but – as it turned out – that contract no longer applied for the charges at issue in the case. The debtors claimed lawyer Ronald A. Ray should have been quicker to catch the error and drop his bid for attorney’s fees.

The appeals court concluded Ray was “diligent in investigating the matter” and removed the fee claim “as soon as he was able to confirm the contract no longer applied.”

The 4th Circuit panel similarly rejected a challenge to assertions about the “reasonable value” of the services provided. The debtors had done no more than “suggest that the numbers ‘smell fishy,’” an insufficient showing on summary judgment, according to the court.

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