Prevailing Defendant Can Recover Costs in FDCPA Suit Not Filed in Bad Faith, Supreme Court Rules

by Ballard Spahr LLP
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A prevailing defendant in a Fair Debt Collection Practices Act (FDCPA) case can recover costs even without a court finding that the plaintiff filed suit in bad faith and for the purpose of harassment, the U.S. Supreme Court has ruled.

In Marx v. General Revenue Corp., the Supreme Court affirmed the 10th Circuit’s decision upholding a district court’s award of costs under Federal Rule of Civil Procedure 54(d) to a prevailing debt collector in an FDCPA suit without a finding of bad faith and a purpose of harassment. Rule 54(d) provides that “[u]nless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party.”

The FDCPA’s costs provision allows a court to award a defendant “attorney’s fees reasonable in relation to the work expended and costs” upon a finding that the suit “was brought in bad faith and for the purpose of harassment.” The plaintiff had argued that this provision superseded Rule 54(d) because it “provided otherwise” by only allowing a court to award costs upon such a finding.

The Supreme Court concluded that that the FDCPA provision was not contrary to Rule 54(d), but instead merely codified a district court’s long-standing authority to award attorney’s fees when a suit is brought in bad faith and award costs to a prevailing party. The Court found that the FDCPA’s reference to costs was intended to remove any implication that a defendant can only recover attorney’s fees when a suit is brought in bad faith. The language was not intended to limit a court’s discretion to award costs under Rule 54(d), even when bad faith and a purpose of harassment are absent, the Court determined.

The decision represents a defeat for the Consumer Financial Protection Bureau, which, jointly with the Federal Trade Commission and U.S. Department of Justice, had filed an amicus brief in the Supreme Court supporting the plaintiff’s position.

Members of Ballard Spahr’s Consumer Financial Services Group regularly consult with their clients engaged in consumer debt collection on compliance with the FDCPA and state debt collection laws, and the Group has created a team of lawyers who are already helping debt collectors and debt buyers to prepare for their first CFPB examinations.

The Group is nationally recognized for its guidance in structuring and documenting prepaid cards and other consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com, Collection Documentation Task Force Chair Christopher J. Willis at 678.420.9436 or willisc@ballardspahr.com, Glen P. Trudel at 302.252.4464 or trudelg@ballardspahr.com, Stefanie H. Jackman at 678.420.9490 or jackmans@ballardspahr.com, or Heather S. Klein at 215.864.8732 or kleinh@ballardspahr.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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