Monday, December 26, 2011

FYI: 10th Cir Holds Verification of Employment Faxed to Consumer's Employer Did Not Violate FDCPA, Prevailing Defs Entitled to Costs Without Bad Faith Finding Under FDCPA

The U.S. Court of Appeals for the Tenth Circuit recently held that: (1) a
facsimile sent by a debt collector to a borrower's workplace for the
purpose of verifying the borrower's employment did not constitute a
"communication" under the Fair Debt Collection Practices Act ("FDCPA"),
absent evidence that the employer knew the facsimile was sent in
connection with a debt, and (2) a prevailing defendant in a FDCPA action
may be awarded costs without a finding that the plaintiff brought the suit
in bad faith and for the purpose of harassment. A copy of the opinion is

Defendant General Revenue Corporation ("GRC") was hired to collect on
plaintiff-borrower's delinquent student loan. GRC sent a facsimile the
borrower's employer, seeking to verify the borrower's employment. The
facsimile did not make any reference to debt collection. However, it did
include GRC's corporate logo, and GRC's account number for the borrower.

The borrower sued GRC, alleging among other things that the facsimile sent
by GRC violated the FDCPA's prohibition of debt collector communications
with third parties. The lower court found no violation of the FDCPA, and
awarded costs to GRC. The borrower appealed.

As you may recall, the FDCPA provides that "a debt collector may not
communicate, in connection with the collection of any debt, with any
person other than the consumer." 15 U.S.C. Sec. 1692(e). A
"communication" is defined as "the conveying of information regarding a
debt directly or indirectly to any person through any medium." Id. at
Sec. 1692(a)(2).

The Tenth Circuit held that because the facsimile sent by GRC did not
"indicate to the recipient that the message relates to the collection of a
debt," it did not constitute a "communication" as that term is defined in
the FDCPA.

In so holding, the Court was influenced by the fact that the borrower did
not allege that her employer was aware that the communication related to
the collection of a debt. Had there been any evidence to that effect, the
Court suggested that "the case would be different." Nevertheless, the
Court noted that the borrower had the burden of proving that the facsimile
conveyed information regarding a debt. Because the borrower failed to
meet that burden, the Tenth Circuit affirmed the lower court's ruling.

Next, the Tenth Circuit examined the lower court's award of costs to GRC.
It began by scrutinizing the relevant statutes. Rule 54(d) of the Federal
Rules of Civil Procedure provides that "[u]nless a federal statute, these
rules, or a court order provides otherwise, costs - other than attorney's
fees - should be allowed to the prevailing party." Fed. R. Civ. P.
54(d)(1). The FDCPA provides that if an action is brought "in bad faith
and for the purposes of harassment, the court may award to the defendant
attorney's fees reasonable in relation to the work expended and costs."
15 U.S.C. Sec. 1692k(a)(3).

Here, there was no finding that the borrower brought the suit in bad faith
and for the purpose of harassment. Therefore, the case turned on whether
Sec. 1692k supersedes Rule 54(d).

The Tenth Circuit held that it does not. It noted that statutes enacted
subsequent to the Federal Rules of Civil Procedure should be read to
harmonize with those Rules, where possible. See U.S. v. Gustin-Bacon
Div., Certainteed Prods. Corp., 426 F.2d 539, 542 (10th Cir. 1970).
Moreover, because the presumption that the prevailing party is awarded
costs is "a venerable one," the Tenth Circuit required "[a] clear showing
of legislative intent...before we find that Rule 54(d) is displaced by

The Court did not find any such "clear showing" in its examination of the
Rule 1692k itself, or in the relevant legislative history. Because
"nothing in the language of Sec. 1692(k)" prevents Rule 54(d)'s normal
operation, the Tenth Circuit affirmed the lower court's award of costs in
favor of the defendant debt collector.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

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