Supreme Court Grants Certiorari in FDCPA Case on Awarding Costs

On May 29, 2012, the U.S. Supreme Court announced it would hear a case in which a debt collection agency was awarded costs in a Fair Debt Collection Practices Act (FDCPA) lawsuit pursuant to Federal Rule of Civil Procedure 54(d). The question before the Supreme Court is whether a prevailing defendant in an FDCPA case is entitled to costs, regardless of whether the plaintiff brought the suit in bad faith and for the purpose of harassment.

The case, Marx v. General Revenue Corp., No. 11-1175, was originally brought by a consumer who defaulted on her student loan and alleged that a debt collection agency violated the FDCPA by sending a fax to her workplace that requested information about her employment status. The district court dismissed the consumer’s claim and concluded the collection agency’s fax did not violate the FDPCA because it was not a “communication” as defined by the Act. The district court awarded the collection agency costs pursuant to Federal Rule of Civil Procedure 54(d) and did not find that the consumer’s action was not brought in bad faith and for the purpose of harassment. The consumer appealed.

Although Federal Rule of Civil Procedure 54(d) allows a prevailing party to recover costs, the consumer argued the FDCPA’s cost provision, § 813(a)(3), makes clear that a court may award costs to a successful defendant only if the court finds that the plaintiff brought the action in bad faith and for the purpose of harassment.

The U.S. Court of Appeals for the Tenth Circuit affirmed the district court’s decision and held that the FDCPA’s cost provision does not supersede Rule 54(d). The appellate court reasoned that although the FDCPA’s cost provision only provides for an award to the defendant when a court finds the plaintiff brought the case in bad faith and for the purpose of harassment—which was not the case here—it does not specifically prohibit a court from awarding costs to a prevailing defendant in other instances.

The Supreme Court’s decision will determine whether a debt collector who prevails in an FDCPA action may recover the costs incurred in defending the action, even when a court does not find that the consumer brought the action in bad faith and for the purpose of harassment. ACA will continue to monitor this appeal and update the membership of new developments.

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