Prevailing Debt Collector Can Recover Costs In FDCPA Suit Without A Finding Of Bad Faith

In what some have characterized as a defeat for the Consumer Financial Protection Bureau (CFPB), the United States Supreme Court has ruled that a prevailing defendant in a FDCPA suit can recover costs without having to show that the suit was filed in bad faith or for the purpose of harassment. This decision not only represents a rejection of the position that was taken by the CFPB and the FTC in a jointly filed amicus brief, but it should also serve to discourage frivolous nuisance suits claiming violations of the FDCPA.

In Marx v. General Revenue Corp., Olivea Marx filed suit against General Revenue Corp (GRC) for alleged violations of the FDCPA. Early in the case, GRC offered to settle the case for $1,500.00, plus reasonable attorney fees and costs. Marx, however, elected not to accept the offer. After trial, the district court found that Ms. Marx failed to prove any violation under the FDCPA and entered judgment in favor of GRC. As the prevailing party, GRC submitted a costs bill seeking $7,779.16 in witness fees, witness travel expenses, and deposition transcript fees. The court disallowed several items of costs and, pursuant to Federal Rule of Civil Procedure 54(d)(1), ordered Marx to pay GRC $4,543.03.

Ms. Marx moved to vacate the award of costs, arguing that the civil liability section of the FDCPA, 15 U. S. C. §1692k(a)(3), supersedes Civil Rule 54(d) and Civil Rule 68(d), and only allows an award of costs upon an express finding that the suit was brought in bad faith and for the purpose of harassment. The district court found Ms. Marx’s argument to be unpersuasive and denied her motion to vacate the costs award. On appeal, the Tenth Circuit Court of Appeals affirmed the district court’s order, and Ms. Marx then appealed to the United States Supreme Court, which agreed to hear her case.

The Supreme Court rejected Ms. Marx’s position, which was supported by the CFPB and the FTC in an amicus brief they jointly filed. The Court concluded that the civil liability provision of the FDCPA was not contrary to Rule 54(d), but instead merely codified a trial court’s long-standing authority to award attorney’s fees and costs when a suit is brought in bad faith. Accordingly, the Court held that a prevailing debt collector can recover costs without having to prove that the plaintiff brought the FDCPA case in bad faith.

Whether this decision will discourage the filing of frivolous FDCPA lawsuits remains to be seen. As a practical matter, however, if nothing else, potentially having to pay the defendant’s costs should serve to encourage parties to enter into reasonable settlements at the early stages of such cases.

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