Supreme Court Watch: Marx v. General Revenue Corp.
The election is over, and the votes are still being counted. And we’ll discuss the election’s aftermath over the next several days. But there’s more going on than that. We’re in the second month of Supreme Court hearings. Today focuses on one of them.
How much protection does an individual have from a debt collector? Legally, a debt collector is not supposed to engage in harassment. Is it harassment for a consumer to sue the debt collector?
Former student Elenea Marx defaulted on a student loan. In September of 2008, the guarantor of the loan, a division of the California Student Aid Commission called Edfund, hired a debt collection agency — the General Revenue Corporation, or GRC, to collect the outstanding balance on the loan. In October 2008, Marx sued GRC, alleging abusive and threatening phone calls in violation of the Fair Debt Collection Practices Act (FDCPA). The Federal Trade Commission (FTC) and the new Consumer Financial Protection Bureau (CFPB) share authority to enforce the Act.
One of the things GRC did, easily documented, was to send a fax to Marx’s employer, displaying basic contact information for GRC, with blanks left for the employer to fill in information about Marx’s employment status and other related information. The FDCPA prohibits “communications” with third parties in an efforts to collect a debt. Marx amended her complaint in March of 2009 to add a claim that GRC violated the FDCPA by sending the fax to her workplace to request employment information.
The district court dismissed her complaint. She apparently did not provide sufficient evidence of being harassed. On the matter of the fax, which no one disputed had been sent, the court held a fax is not a “communication” within the meaning of the law. The FDCPA had originally been enacted in 1978 as Title VIII of the Consumer Credit Protection Act. It had been modified many times since then, as recently as 1996. Even so, the court ruled that a fax does not fall within the FDCPA definition of a “communication”, and therefore, GRC did not violate the law.
Losing the case was bad enough, but civil law is designed to protect people who are unjustly sued. GRC was awarded their legal costs to defend themselves, a sum of over $4,500. In addition to losing her suit, Marx had to pay GRC’s legal fees. Now, the FDCPA recognizes that a corporation has a much better chance of defending itself, and a good chance of hiring a crack legal team. The threat of having to pay stratospheric legal costs may be enough to discourage even legitimate suits from consumers who have been abused. FDCPA therefore says that legal costs for the corporation being sued are only reimbursable when the suit against them is brought in “bad faith” or as a form of “harassment.”
The trial court did not address this issue, did not rule on whether Marx’s suit was brought in “bad faith” or intended as “harassment.” The trial judge merely awarded court costs and legal fees to the defendant. This provided Marx with the ability to appeal the ruling,
The U.S. Court of Appeals for the Tenth Circuit, however, upheld the ruling of the district court, with one dissent. The Circuit Court not only upheld the case on its merits (that is, Marx lost her accusation of being harassed by GRC), and held that the fax was not a “communication,” but also ruled that, although there was no evidence of “bad faith” on her part, the FDCPA did not prevent her from being required to pay GRC’s legal costs.
Marx has appealed to the U.S. Supreme Court. Oral arguments are today. One aspect of the case is that a joint amicus brief has been filed by the FTC and CFPB (who are responsible for enforcing the law), and the Department of Justice. They argue that the Tenth Circuit’s decision was inconsistent with the FDCPA. The law says that while consumers who win lawsuits against debt collectors may recover their legal costs from the defendants, the only situation in which consumers who lose must pay defendants’ costs is if there is provable bad faith or harassment on their part. The amicus brief also argues that Congress’ intent in enacting the law was to deter abusive debt collection practices. In contrast, the Tenth Circuit’s ruling would create a disincentive for consumers to bring suit, and is therefore in conflict with the will of Congress.
What are your feelings on these issues? Should a fax be considered a “communication” and thus be disallowed under the FDCPA? Should the Supreme Court rule in favor of GRC, and require Marx to pay for the company’s legal costs, despite any apparent bad faith or harassment on her part? What does this say for the proper balance of power between consumers and debt collectors?
- Argument preview: Court considers litigation expenses in debt-collection disputes
- Supreme Court grants petition in FDCPA case
- Fair Debt Collection — Thwarting Abusive Collections Tactics
- Collection Agencies and Your Rights
About dcpetterson (198 posts)
D. C. Petterson is a novelist and a software consultant in Minnesota who has been writing science fiction since the age of six. He is the author of A Melancholy Humour, Rune Song and Still Life. He lives with his wife, two dogs, two cats, and a lizard, and insists that grandchildren are the reward for having survived teenagers. When not writing stories or software, he plays guitar and piano, engages in political debate, and reads a lot of history and physics texts—for fun. Follow on Twitter @dcpetterson