Oct. 11, 2012 — Financial services attorney Donald Maurice has authored an amicus brief for the U.S. Supreme Court on behalf of the National Association of Retail Collection Attorneys in the case of Marx v. General Revenue Corp.
In the brief, NARCA argues that the Fair Debt Collection Practices Act should not be given special status under the law and that the Federal Rules of Civil Procedure, which allow a prevailing defendant in a lawsuit to recover its fees and costs, should apply to FDCPA cases.
Further, NARCA contends that by allowing the prevailing defendant to recover its costs, the decision will help stem the growing number of baseless lawsuits filed under the FDCPA.
The Fair Debt Collection Practices Act was passed by Congress in 1977 to eliminate abusive, deceptive and unfair debt collection practices by third party debt collectors. However, the FDCPA has a fee shifting provision. Under this provision, if a consumer prevails in a suit, the debt collector must pay the plaintiff’s attorney’s fees and costs, but if a debt collector prevails, the debt collector/defendant might recover its fees and costs only if the debt collector can prove that the suit was brought in bad faith, an even higher standard under the law than that for frivolous lawsuits.
As a result of this provision, since the law was enacted the number of suits filed under the FDCPA has grown dramatically in recent years, said Maurice. The number of suits filed went from 3,215 suits in 2005, to 12,018 suits in 2011, according to WebRecon, LLC, representing an increase of 373 percent.
“A typical FDCPA lawsuit is not based on an actual loss, but on a marginal, technical violation where the plaintiff seeks to recover $1,000 or less. But, the FDCPA allows a plaintiff to recover attorney’s fees, and that’s really what drives the lawsuit and a good deal of the FDCPA litigation throughout the country. If costs cannot be shifted to a person who brings a marginal and ultimately unsuccessful lawsuit, there is no downside for plaintiff’s attorneys to bring such suits. It necessarily encourages even more marginal claims, more litigation and more wasted resources,” Maurice said.
“At the heart of the matter is whether the fee shifting provision of the FDCPA trumps the federal rules of civil procedure. We would argue that the federal rules are not trumped and apply to suits where the defendant prevails,” Maurice added.
The full text of the NARCA brief is available at http://www.narca.org/public/download/NARCAAmicusMarxvGenRev.pdf.