What is a Bona Fide Error
Bona fide error is a legal term referring to an unintentional mistake or oversight that may be corrected promptly to avoid exposure to legal action. Bona fide is from the Latin and used to mean "in good faith.” It is commonly used as a legal term if a party fails to follow the law in attempting to collect a debt. For example, under the Truth in Lending Act, a creditor can avoid legal liability by demonstrating that a violation was unintentional and caused by a bona fide error, including clerical, calculation, computer malfunction or printing error. An error in legal judgment, however, is not ordinarily considered a bona fide error.
Some types of mergers require specific bona fide rules, such as the reverse triangle merger.
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BREAKING DOWN Bona Fide Error
An example of a creditor claiming a bona fide error might be continuing to attempt to collect a debt that had already been paid. If the payoff had not been recorded properly because of a clerical or systems error, or because incorrect information was received from a prior creditor, the debt collector might claim a bona fide error to defend against prosecution.