Decision in Marx v. General Revenue Corp.
By Leah Nicholls, Kazan-Budd Attorney
After Olivea Marx defaulted on student loans, her lender hired a debt collection company called General Revenue to collect on the loan. Marx alleges that she was lied to, harassed and threatened by the company. She sued, saying General Revenue’s actions were in violation of the Fair Debt Collection Practices Act, which seeks to protect consumers by placing limits on the tactics debt collectors can use.
But the district court found that Marx had failed to prove a violation of the FDCPA.
Adding insult to injury, the district court also awarded over $4,500 in costs (covering expenses like witness travel and deposition transcripts) to General Revenue under FRCP 54(d)(1), which permits a court to award costs to a prevailing party unless a federal statute “provides otherwise.”
Today, in Marx v. General Revenue Corp., the Supreme Court held 7-2 that a debt collector who prevails in an FDCPA case can be awarded costs at the discretion of the district court despite language in the FDCPA that would seem to place limits on the general rule. Justice Thomas delivered the opinion.
I see a problem here. The FDCPA provides that a defendant debt collector is entitled to attorney’s fees and costs ONLY when the suit “was brought in bad faith and for the purpose of harassment.” But there was never any allegation that Marx had brought the suit in bad faith. So the question, then, was whether the FDCPA “provides otherwise.” Justices Sotomayor and Kagan disagreed with Justice Thomas’s opinion that the bad-faith provision did not “provide otherwise.” Rather, Sotomayor and Kagan reasoned that the normal English interpretation of “provides otherwise” would include the more specific FDCPA provision.
The United States had filed an amicus brief supporting Marx, and our friends over at Public Citizen represented Marx in the Supreme Court.
The FDCPA is generally intended to encourage non-frivolous suits against debt collectors employing illegal tactics (while also punishing bad-faith suits). But the Court’s interpretation of Rule 54(d)(1) seriously undermines that goal. Now, any consumer — those who are cash-strapped are most vulnerable — who loses an FDCPA case can be hit with potentially astronomical claims for costs, especially if the case goes to trial, as it did here.
Most consumers will likely conclude that the risk is just too high to proceed even if they are subject to illegal debt collection tactics — a conclusion at odds with the purpose of the FDCPA and a boon for debt collectors.