The case involves a woman with delinquent student loans who sued a debt collector for calling her multiple times per day, threatening her with wage garnishment and faxing inquiries to her employer. The FDCPA provides legal remedies for a range of illegal and unethical activities that are intended to intimidate and harass borrowers.
A Federal District Court in Colorado found that the debt collector had not broken any laws and ordered her to pay more than $4,000 in court costs. The 10th Circuit Court of Appeals affirmed the lower court’s judgment, including the imposition of costs on a consumer who had not been shown to act in bad faith or for purposes of harassment against the debt collector.
Debt collectors have traditionally been required to absorb court costs, even if the debtor loses, as long as he or she acted in good faith. That exception to the way costs are treated in most civil claims is the result of long-held interpretations of the FDCPA and the Federal Rules of Civil Procedure. In upending this established practice, the Court of Appeals focused on distinctions in the law between court costs and attorney’s fees.
Various consumer advocacy groups and federal agencies have filed briefs in the case to oppose this fundamental shift to consumer protection laws that could have a chilling effect on legitimate claims against collectors that harass borrowers. The Federal Trade Commission, the Consumer Financial Protection Board, AARP and the National Consumer Law Center have all registered their support of the borrower’s appeal.
Stopping creditor harassment via Chapter 7 or Chapter 13 bankruptcy
However the Supreme Court rules in this case, an individual or couple’s right to an automatic stay after a bankruptcy filing remains a potent legal options for those struggling with debt. Filing for bankruptcy stops creditors in their tracks because they must await the resolution of the legal process and accept their approved share of a Chapter 7 liquidation or Chapter 13 repayment plan. A bankruptcy attorney can further explain the relative advantages of FDCPA claims, bankruptcy filings and other debt relief strategies.