In another case construing the FDCPA, but not in a bankruptcy context, the Court ruled on June 12, 2017, in Henson v. Santander Consumer USA Inc., No. 16-349, 2017 BL 198032 (U.S. June 12, 2017), that the purchaser of a defaulted debt is not a "debt collector" subject to the FDCPA.
The FDCPA applies to "debt collectors," a term defined in 15 U.S.C. § 1692a(6) as anyone who "regularly collects or attempts to collect . . . debts owed or due . . . another." The term includes "any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts."
The FDCPA defines the term "creditor" to mean:
any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
15 U.S.C. § 1692a(4).
The statutory definition of "debt collector" excludes a person attempting to collect a debt that was originated by such person, a debt that was not in default at the time it was acquired, or a debt obtained by a secured party in a commercial credit transaction involving the creditor. 15 U.S.C. § 1692a(6)(F).
Santander Consumer USA Inc. ("Santander") purchased a portfolio of defaulted auto loans from a bank. A federal district court and the U.S. Court of Appeals for the Fourth Circuit ruled that Santander did not qualify as a debt collector because it did not regularly seek to collect debts "owed . . . another," but instead, sought only to collect debts which it purchased and owned. However, the Fourth Circuit acknowledged that some circuits faced with the same question have ruled otherwise. Compare Henson v. Santander Consumer USA, Inc., 817 F.3d 131 (4th Cir. 2016) (case below); Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309 (11th Cir. 2015), with McKinney v. Caldeway Properties, Inc., 548 F.3d 496 (7th Cir. 2008); FTC v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007).
Writing for a unanimous court in his first opinion, Justice Gorsuch framed the question as whether the FDCPA treats "the debt purchaser . . . more like the repo man or the loan originator."
Justice Gorsuch explained that the "plain language" of the definition "focuses our attention on third party collection agents working for a debt owner—not on a debt owner seeking to collect debts for itself." He further noted that the statute "does not appear to suggest that we should care how a debt owner came to be a debt owner."
"All that matters," Justice Gorsuch wrote, "is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another.’ " That analysis, he observed, "would seem" to mean that a debt purchaser does not fall under the statutory definition.
Justice Gorsuch rejected the policy argument that, because the business of purchasing defaulted debt did not exist when the FDCPA was adopted, lawmakers would have viewed defaulted debt purchasers more like debt collectors than debt originators. He wrote that "it is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done"; instead, that job is to "apply, not amend, the work of the People’s representatives."
The Court declined to address the argument that Santander fell within the scope of the FDCPA because it regularly collected debts for another, since the question was not raised in the petition for review. In addition, the Court had not agreed to address another aspect of the definition of "debt collector" in 15 U.S.C. § 1692a(6), which includes someone "in any business the principal purpose of which is the collection of any debts."