Supreme Court Sides with Debt Collector in FDCPA Case

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Plaintiffs that lose lawsuits claiming violations of the Fair Debt Collection Practices Act (FDCPA) may be liable for costs to their defendants even if the case was not brought in bad faith, so ruled the Supreme Court Tuesday.

In a 7-2 majority decision, the Justices ruled for a debt collector in the case Marx v. General Revenue Corp. The question before the Court was whether a defendant in an FDCPA case is entitled to costs should they win the case, even if the case was not initially brought by the plaintiff in bad faith or for the purposes of harassment.

The case was closely watched by the ARM industry for obvious reasons. But it also attracted plenty of attention from other quarters. The FTC, Department of Justice, and the CFPB filed a joint amicus brief in the U.S. Supreme Court in support of Marx, with a DoJ representative actually joining oral arguments in the case.

The action was originally brought by a student loan debtor who claimed General Revenue violated the FDCPA by sending an employment verification fax to her job while attempting to collect the debt. A federal judge found that General Revenue’s actions did not violate the FDCPA because the fax was not a “communication” under the law and dismissed the case. The district court judge in Colorado awarded the company $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.”

Although the FDCPA claim decision was also presented to the Supreme Court, the Justices elected to hear arguments only about the awarding of costs.

Adam Plotkin, of Adam L. Plotkin, P.C. – a law firm defending General Revenue in the case – said that by declining to consider the FDCPA “communication” question before it, the Supreme Court left the appeals court opinion as the highest court in the country to have ruled upon this issue.

“The Marx court, the Tenth Circuit Court, ruled that if you don’t convey information about the debt, you don’t have a ‘communication’ under the FDCPA, and therefore there is no third-party disclosure under the FDCPA,” said Plotkin. “By applying the express definition of ‘communication’ as it is set forth in the FDCPA, the Marx Court stuck a dagger in the heart of Foti.”

Reaction to Tuesday’s decision from the ARM legal community has been swift and very positive.

“We are hopeful this important decision will assist in reducing the incentive for frivolous and meritless allegations filed by consumers against its members,” said ACA International CEO Pat Morris in a statement.

Don Maurice, an attorney who wrote an amicus brief in support of General Revenue on behalf of the National Association of Retail Collection Attorneys (NARCA) wrote on his blog Tuesday, “The decision provides some relief to defendants in FDCPA cases that are successfully defended.  It can be very difficult to satisfy the standard of ‘bad faith and for the purpose of harassment’ when attempting to recover costs and attorneys fees.”

“The hope is a litigant will think twice before asserting a questionable FDCPA claim,” Maurice later told “There are far too many FDCPA suits premised on marginal factual or legal claims which, if litigated, would likely fail. While these suits may not be brought in bad faith, they still tie up our clients’ important resources.”

The Supreme Court’s seven-justice majority opinion was written by Justice Clarence Thomas. Justices Kagan and Sotomayor dissented.


Continuing the Discussion

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  • avatar paybill says:

    as it should be. Thank you General Revenue Corp, ACA and all involved!

  • avatar jmapes says:

    This is huge for the industry! It’s nice to see some relief for the industry but it’s also nice to see that defendant attorneys will change from always recommending paying out suits to actually standing more often against frivolous lawsuits and the attorneys that hunt down this industry.

  • avatar Debt Guy says:

    This is fantastic. Hopefully the industry will suffer less extortion attempts by consumer attorneys now.

  • avatar FriendoftheCourt says:

    Before all of you wet your pants to the point of embarrassment, this isn’t really a “win”.

    In order to get it you have to make an offer of judgement…pleading guilty, so to speak…have that offer rejected, and prevail to an amount less than what you offered.

    This is nothing more than what the laws already permitted/required.

  • avatar Farley Fjnork says:

    “There are far too many FDCPA suits premised on marginal factual or legal claims which, if litigated, would likely fail. While these suits may not be brought in bad faith, they still tie up our clients’ important resources.”

    Let’s be realistic, here. Any one of the top 3 debt buyers file more lawsuits that THEY CANNOT PROVE, or CANNOT WIN (i.e. – out of SOL, robo-signed affidavits – they’re just seeking a D.J.) than all the FDCPA suits filed, meritless or not.

    The much more important story, today, is the secondary one on the voiding of Encore Capital’s Class action settlement – (ps – see “top 3 debt buyers in paragraph, above!)

  • avatar Johnathan Bell says:

    Further, when you actually read the case. No attorneys fees are allowed–just costs of the action.

    It is better than before, but in most cases it is the attorneys fees that drive the expense.

  • avatar Tom Gillespie says:

    General Revenue is to be commended for their commitment to this case. Thank you.

  • avatar FriendoftheCourt says:

    Commended for their commitment to the case?

    This is nothing more or less than the law allowed previously.

    This is much more a slap at the judges along the line of the litigation than it is a “win” of anything!

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