A fax should not be considered a “communication” under the Fair Debt Collection Practices Act, the U.S. Court of Appeals for the Tenth Circuit has ruled, unless the fax indicates to the recipient that it relates to the collection of a debt. Significantly, the appellate court’s reasoning suggests that a message left on an answering machine that merely requests a return call also would not be a “communication.”

In Marx v. General Revenue Corp., issued on December 21, 2011, the Tenth Circuit affirmed the district court’s ruling that a debt collector did not violate the FDCPA’s prohibition on third-party communications by faxing an employment verification form to the plaintiff’s employer. The form displayed the debt collector’s name, logo, address, and phone number, along with the internal number used by the collector to identify the plaintiff’s account.

The FDCPA defines a “communication” as the “conveying of information regarding a debt directly or indirectly to any person through any medium.” The Tenth Circuit’s decision (which included a dissenting opinion) appears to be the first by a federal appellate court to address the issue of whether that definition requires the recipient to recognize that a message relates to debt collection. According to the Tenth Circuit, the fax at issue could not be construed as “conveying” any “information regarding a debt” because it did not indicate to the recipient that the fax related to debt collection, nor did it imply the existence of a debt.

The court held that, to satisfy the FDCPA’s definition of a “communication,” the plaintiff would have to show that her employer either knew or inferred that the fax involved a debt. This common sense approach may be the first step in ending the Hobson’s choice currently facing debt collectors whenever a call to a debtor is picked up by an answering machine as a result of the 2006 federal court decision from the Southern District of New York. The ruling in Foti v. NCO Financial Systems, Inc. effectively required a debt collector to either hang up or leave an awkward, elaborately scripted message.

The Tenth Circuit’s decision is also helpful on the issue of costs. It affirmed the district court’s award of costs to the debt collector under Federal Rule of Civil Procedure 54(b), which 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.” The plaintiff had argued that Rule 54(b) was superseded by the FDCPA’s costs provision (15 U.S.C. §1692k(a)(3)), which allows a court to award the defendant “attorney’s fees reasonable in relation to the work expended and costs” upon a finding that the suit was brought in bad faith and for the purpose of harassment.

In reaching its conclusion, the Tenth Circuit held that the FDCPA’s cost provision did not displace Rule 54(b), but instead merely recognized the long-standing rule that the prevailing party is entitled to reimbursement of the costs of suit. In ruling that the district court had properly awarded costs to the debt collector, the Tenth Circuit rejected the Ninth Circuit’s contrary interpretation of the FDCPA’s costs provision. (The dissent noted that the Second Circuit, in dicta, had agreed with the Ninth Circuit.)

Ballard Spahr lawyers regularly consult with their clients engaged in consumer debt collection on compliance with the FDCPA and state debt collection laws.

Ballard Spahr’s Consumer Financial Services Group produces the CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe, use the link provided to the right. The group is nationally recognized for its guidance in structuring and documenting prepaid cards and other consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

For more information, please contact Practice Leader Alan S. Kaplinsky, 215.864.8544 or kaplinsky@ballardspahr.com; Practice Leader Jeremy T. Rosenblum, 215.864.8505 or rosenblum@ballardspahr.com; John L. Culhane, Jr., 215.864.8535 or culhane@ballardspahr.com; Barbara S. Mishkin, 215.864.8528 or mishkinb@ballardspahr.com; or Mark J. Furletti, 215.864.8138 or furlettim@ballardspahr.com.


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