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Supreme Court Ruling May Cut Down on Frivolous Collection Suits

Supreme Court Debt Collection Ruling

The number of frivolous lawsuits against debt collectors may soon be on the decline, following a Supreme Court ruling last month.

In February, the Supreme Court ruled on a case involving the Fair Debt Collection Practices Act. In the case, Marx vs. General Revenue Corp., the main question for the court was whether the defendant in FCDPA cases (the agency) is entitled to court costs if they win the case. The court ruled 7-2 in favor of the debt collector.

The precedent has been for collection agencies to recover costs in cases where the consumer brought the case in bad faith. However, this means agencies may now recover those costs even if the suit was not intended for harassment. Debt collectors are still discussing the impacts of this ruling, but overall, we feel it’s a big win. Plaintiffs who file frivolous lawsuits may now reconsider if they know they may be responsible for the defendant’s legal fees.

While consumers have important rights when it comes to how debts are collected, collection agencies often struggle to satisfy the standard of “bad faith and for the purpose of harassment” — even if they know it to be the truth. There are many instances in which suits are based on marginal claims that would likely fail. Those cases tie up our resources and taxpayer resources.

Hopefully, this decision will not only reduce the number of frivolous lawsuits but allow agencies to recover the fees involved in defending any suits when the court rules in favor of the Agency.