Careful What You Wish For - United States Supreme Court Rules That Prevailing Defendants in FDCPA Cases May Recover Costs Without Having to Show That Case Was Brought in Bad Faith

by K&L Gates LLP
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Will the United States Supreme Court’s decision in Marx v. General Revenue Corp. be the death knell of frivolous and nuisance lawsuits alleging violations of the Fair Debt Collection Practices Act (“FDCPA”)? Only time will tell, but the decision certainly is a step in the right direction. In Marx, the Supreme Court ruled that a defendant that prevails in a suit under the FDCPA may recover its reasonable costs without having to show that the suit was filed in bad faith or for the purpose of harassment. The decision resolves a split among the circuits as to whether a defendant may recover costs in an FDCPA case without having to prove bad faith and harassment.

The FDCPA, among other things, prohibits any debt collector from harassing, abusing or oppressing any person in connection with the collection of a debt. Although the statute provides examples of behavior that would violate the prohibitions, the list is non-exhaustive and it is common for plaintiffs to file individual and class actions alleging that certain actions violate the statute. Until now, the only deterrent in many circuits for losing a lawsuit was out-of-pocket costs. The stakes have been raised.

In Marx, the debtor defaulted on her student loan debt, and was contacted by a debt collector, General Revenue Corp. (“GRC”). Debtor sued the debt collector, citing various forms of alleged abuse and harassment which, debtor contended, violated the FDCPA. At the conclusion of a bench trial, the district court found that the debtor had failed to prove a single violation of the FDCPA, and ordered debtor to pay $4,543.03 in litigation costs to GRC. Debtor appealed the award of costs, and the United States Court of Appeals for the Tenth Circuit affirmed. Debtor next sought and obtained certiorari to the United States Supreme Court.

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