FTC, DOJ, CFPB Dogpile on Collection Agencies
In May, we wrote about Marx v. General Revenue Corp. Olivea Marx sued General Revenue Corp for an FDCPA violation, alleging that when General Revenue sent an employment-verification fax to her work, it violated that collections statute.
As it turns out, General Revenue was on the right side of the law when it sent that fax: the fax was not a communication under the statute. With that in mind, a federal judge found that General Revenue’s actions did not violate the FDCPA and dismissed the case. Additionally, a district court judge in Colorado awarded General Revenue $4,543 in costs, despite the absence of a finding that Marx had brought the case “in bad faith and for the purpose of harassment.”
You can sort of imagine how that went over.
There is precedent of agencies recouping court costs when it’s clear that the consumer sued as a form of harrassment. Marx v. General Revenue Corp complicates that in some ways for a lot of consumers and consumer attorneys. Suits regarding technical violations of FDCPA are a cottage industry; allowing agencies to recoup court costs in unsuccessful attempts makes it a less lucrative endeavor.
Agencies shouldn’t get too excited, though, about this possibility: yesterday, The Federal Trade Commission, the Department of Justice, and the Consumer Financial Protection Bureau filed a joint amicus brief in the U.S. Supreme Court against collection agencies:
“The amicus brief argues that the Tenth Circuit’s decision was inconsistent with the terms of the Fair Debt Collection Practices Act, which specifies that consumers who win lawsuits against debt collectors may recover their litigation costs from the defendants, but that consumers who lose these cases must pay defendants’ litigation costs only if the consumers sued in bad faith or for purposes of harassment. The amicus brief also argues that these provisions of the Act advance Congress’ intent to help consumers deter abusive debt collection practices by bringing private enforcement actions in good faith. By contrast, the Tenth Circuit’s ruling would create a disincentive to the prosecution of private enforcement actions, the brief states.”
If there was a chance that a collection agency could recoup its court costs in the event that a consumer suit against it was thrown out or decided in the agency’s favor, it might be likely that more agencies would pursue legal action in court. As it now stands, there’s little benefit to an agency in fighting a consumer suit: being found to be on the right side of the law can still carry a hefty price tag, and doesn’t outrightly benefit the agency.
We’ll continue coverage of this case as we receive more details.
So, the FTC and DOJ want to give consumers the exact advantage they deny the collections industry? This would stymie most attempts at defending against spurious suits. Why not just say collections agencies can’t be allowed to mount a proper defense?
Whats good for the goose is good for the gander!
I am only surprised that it took this long. I have this image in my mind of the attorneys in the agencies named above drooling over their iPads when that decision came down, all wanting to be the first to file something, anything, to take a shot at the most popular whipping boy on the horizon right now.
Where is ACA and DBA international with briefs in favor of our industry here???
If the FDCPA litigation arose out of the collection of a contract where prevailing party attorneys fees is specified we always defend and make an attempt to recoup our attorneys fees.
As a collection agency owner, I tend to agree with the 10th circuit and the Colorado district circuit court decisions. However, that said, because consumers are clearly inexpert in the interpretation of statutes (the letters I receive daily are proof of that) it would seem to me that it would be both more beneficial to the collection industry and to the consumer if any defendant-agency costs and expenses were required to be paid by the attorney representing the consumer. The attorney clearly must have the knowledge and experience to understand the statutes. This would make consumer attorneys a bit more “concerned” about pursuing legitimate cases rather than taking on all comers and, as it were, throwing lawsuits against the wall to see which ones stick. If, however, the consumer is clearly pursuing the matter simply as harassment, then the consumer AND the attorney should be required to pay the expenses and/or the outcome on any counter-suit.
The court’s job is to enforce the law as written. The holding in Marx clearly runs contrary to the plain wording of the statute.
Talk about wanting to have it both ways.
A consumer files a FDCPA case with no intent to follow through if the collector does not settle. It’s not just to harass and it is hyper technical violation. The collector wins by summary judgement or the consumer dismisses the case. The agency is then stuck with their fees even though they are on the winning side.
A consumer gets sued by an agency with no intent to follow through if the consumer digs in and fights and participates in discovery. The agency dismisses after discovery and summary judgement being defeated, sometimes the day of the trial when the consumer is seen in the courtroom. The consumer is then out their fees and costs, time off work and other expenses, even though they are on the winning side.
So which is it? Do you want to ability to use the power of the courts or not. You can’t cry when it works against you and then use the very same tactic you were crying about and then argue it’s just a good business move when you do it.
You want the FDCPA updated because it’s been decades since it was updated? Yes? but then I hear and read “no way that’s not fair” when it comes to adjusting the 1K max statutory damages to account for inflation, which would put it around 3K or so.
the 10 cir. decision is simply mystifying. the dissent sums it up best :
“A district court may award costs to a defendant “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment.” The only sensible reading of this statute is that the district court may only award costs to a defendant upon such a finding. To read it otherwise is to suggest Congress passed a statute permitting a cost award conditioned upon a finding of bad faith, but intended to permit cost awards without a finding of bad faith.”
in other words, if the costs are already allowed, why does this law say anything at all about them?