The Court held that a prevailing defendant in a Fair Debt Collection Practices Act (FDCPA) suit can be awarded costs, even where the lawsuit was not brought in bad faith and for the purpose of harassment.

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The debt collection lawsuit involved the interplay between the FDCPA and the Federal Rules of Civil Procedure (FRCP). Section 1692k(a)(3) of the FDCPA provides that "[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs." Meanwhile, FRCP Rule 54(d)(1) gives district courts discretion to award costs to prevailing defendants “[u]nless a federal statute . . . provides otherwise.”

The plaintiff in the case, who defaulted on her student loans, argued that the FDCPA’s cost provision automatically displaces Rule 54(d)(1). The Consumer Financial Protection Bureau supported her position through an amicus brief.

In a 7-2 decision, the justices concluded that Section § 1692k(a)(3) is not contrary to, and, thus, does not displace a district court's discretion to award costs under Rule 54(d)(1). The majority acknowledged that the FDCPA is silent on costs where bad faith and purpose of harassment are absent, but agreed with the defendant that “silence does not displace the background rule that a court has discretion to award costs.”

As noted by the Court, Congress knows how to limit costs when it wants to do so. “Although Congress need not use explicit language to limit a court’s discretion under Rule 54(d)(1), its use of explicit language in other statutes cautions against inferring a limitation in §1692k(a)(3),” it explained.

The decision is good news for debt collectors because it ensures that costs are available to successful litigants without meeting the high burden of the FDCPA.

If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Peter Yarem, or the Scarinci Hollenbeck attorney with whom you work.