This month, the Supreme Court heard oral argument in a case with potential to affect companies that purchase consumer debt and then collect it for their own account. The case — Henson v. Santander Consumer USA, Inc., Supreme Court Docket No. 16-349 — centers on the Fair Debt Collection Practices Act’s distinction between “debt collectors,” which are subject to the FDCPA, and “creditors,” which are not. The specific question before the Court is whether a company that regularly attempts to collect debts it purchased after the debts fell into default is a debt collector subject to the FDCPA.
In the case, borrowers who defaulted on auto loans brought a putative class action against Santander Consumer USA, Inc., claiming its debt collection practices violated the FDCPA. Santander had purchased the plaintiffs’ defaulted debt at a discount from the originator before attempting to collect on it. Santander moved to dismiss the claim, arguing that it was not a debt collector within the meaning of the FDCPA. Among other things, Santander argued that the FDCPA applies to those who collect debts for “another,” not to those who collect debts for their own account. The district court agreed with Santander and dismissed the claim. The Fourth Circuit affirmed. See Henson v. Santander Consumer USA, Inc., 817 F.3d 131 (4th Cir. 2016).
The Supreme Court’s upcoming decision in this case is expected to resolve a circuit split on this issue. Along with the Fourth Circuit, the Ninth and Eleventh circuits have held that collectors of purchased defaulted debt are not debt collectors subject to the FDCPA. The Third, Fifth, Sixth, and Seventh circuits and the District of Columbia Court of Appeals have each, to some extent, held the opposite.