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Supreme Court Ruling in Student Loan Case May Discourage Lawsuits

In a case involving a student loan collections dispute, the U.S. Supreme Court issued a ruling in favor of a debt collector, the ABA Journal reports.

This ruling, which awarded court costs to the debt collector, could potentially send a powerful message to the little guy: Don't sue your debt collector, no matter how much they allegedly harass you.

Consumers are supposedly protected under the Fair Debt Collection Practices Act. The Act prohibits creditors and debt collectors from pursuing a debtor unfairly or using unfair tactics.

A lawsuit was brought by Olivea Marx, a student debtor who claimed that General Revenue Corporation violated the Fair Debt Collection Practices Act by making harassing phone calls and threats to garnish her wages. They even sent a fax to her place of work, Courthouse News Service reports.

Despite these tactics, a trial court found that Marx did not make a strong case and the judge ordered her to pay $4,500 in court costs to General Revenue Corporation.

Marx eventually appealed her case to the U.S. Supreme Court. But last week, the Court sided with the debt collector and upheld the order for Marx to pay $4,500 in court costs.

Marx had argued that the fee-shifting provisions in the law said that she would only have to pay court costs if she'd brought the lawsuit in bad faith.

That argument, however, was shot down by the Court.

Student loans are a huge burden to many Americans. The scary truth about student loans is that they are very tough to pay off and even tougher to get rid of if you can't pay them off. For example, student loans aren't typically dischargeable in bankruptcy.

A student debtor can be subject to a variety of tactics by creditors and still not be in a position to fight back. As this case shows, if a student does fight back against allegedly unfair debt collection practices, she runs the risk of having to pay court costs if she loses her case.

Not exactly what you'd call a "win-win" situation for student debtors.

March 7, 2013 Editor's Note: This post has been updated to clarify that the trial court awarded court costs, not legal fees.

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