The Fair Debt Collection Practices Act (the “FDCPA”) allows consumers to sue debt collectors for harassment and unfair practices. Unless the lawsuit is brought in bad faith (bad faith means the consumer brought a false claim to harass the debt collector), consumers do not need to worry about having to pay the debt collector’s attorneys fees – even when the consumer loses the case.
However, in Marx v. General Revenue Corporation, the U.S. Supreme Court recently decided that a debt collector can be awarded litigation costs when the consumer loses, even when the case is not brought in bad faith.
The lawsuit between Marx (the consumer) and General Revenue Corporation (“GRC” – the debt collector) started in a Colorado district court, where Marx alleged that GRC violated the FDCPA by making improper communications by phone and facsimile. At a bench trial, GRC was found not guilty; and GRC was thereafter awarded litigation costs.
Litigation costs are different from attorneys fees. Costs can include witness fees, deposition costs, transcription costs, and similar expenses that are incurred during the course of litigation. Costs are usually far less than attorneys fees, though they can be substantial.
After the Colorado district court awarded GRC costs, Marx appealed. The case was eventually heard by the U.S. Supreme Court in February, 2013.
In a 7-2 decision written by Justice Thomas, the U.S. Supreme Court held that litigation costs can be awarded to a defendant debt collector in FDCPA lawsuits. The court made its decision by examining the relationship between two legal rules: section 1692k(a)(3) of the FDCPA and Rule 54(d)(1) of the Federal Rules of Civil Procedure.
Section 1692k(a)(3) of the FDCPA provides that “[o]n a finding by the court that an action under this section was brought in bad faith and for the purposes of harassment, the court may award the defendant’s attorneys fees reasonable in relation to the work expended and costs.” The FDCPA does not explicitly address costs for cases that are not brought in bad faith.
Rule 54(d)(1) of the Federal Rules of Civil Procedure – which are the procedural rules that govern nearly all civil actions in federal court – gives a district court discretion to award costs to prevailing defendants “unless a federal statute . . . provides otherwise[.]”
In Marx v GRC, the essential question presented was whether section 1692k(a)(3) is statute that “provides otherwise[.]” The U.S. Supreme Court held that the FDCPA does not provide otherwise; costs can be awarded to the winning defendant whether or not the case was brought in bad faith.
The court reasoned that a since the Federal Rules of Civil Procedure provide that a winning defendant can be awarded costs, any statute changing that rule must expressly state otherwise. Under the court’s reasoning, the FDCPA does not take away this right to be awarded costs because the language does not address cases which are not brought in bad faith.
This decision may place a chilling effect on FDCPA lawsuits, as consumers will be concerned about paying for costs for losing cases. However, costs are awarded at the discretion of the court, and many courts that find the imposition of costs unfair will either limit or not award costs.
Despite this ruling, consumers who can make strong and well-supported allegations that a debt collector violated their rights should not shy away from filing lawsuits in federal court.
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