Zombie debt and the Supreme Court

This may be a first: I’ve been cited to the Supreme Court.

Specifically, a column I wrote back in 2006 about “zombie debt” was cited in a brief filed by AARP, the Consumer Federation of America, the National Association of Consumer Advocates and other good folks for a case known as Marx v. General Revenue Corp. The case is about whether someone who lost a lawsuit against a collector can be forced to pay damages if the lawsuit wasn’t filed “in bad faith and for purposes of harrassment.”

Olivea Marx sued debt collector General Revenue Corporation after it contacted her employer to find out about her employment status. Marx believed that General Revenue’s action violated the Fair Debt Collection Practices Act. She lost, and the U.S. Court of Appeals for the 10th Circuit ruled she had to pay more than $4,500 to cover the collector’s legal costs.

The Federal Trade Commission, the Department of Justice and the Consumer Financial Protection Bureau also have weighed in against the decision, saying it was inconsistent with the FDCPA, which says people who lose cases against collectors must pay defendants’ litigation costs only if the consumers sued in bad faith or for purposes of harassment.

Collectors complain about frivolous lawsuits. Consumer advocates counter that more lawsuits would be filed if people truly understood their rights. The AARP/CFA brief notes that there isn’t much regulatory enforcement of fair debt collection practices laws, which leaves private action in the form of lawsuits brought by consumers. Debt collection already tops the list of industries that draw FTC consumer complaints; imagine how much bolder collectors might be if they could win damages against anyone who sued them and lost.