In a recent unanimous decision the United States Supreme Court held that a company that collects purchased debts is not subject to the Fair Debt Collection Practices Act (“FDCPA”). Henson et al. v. Santander Consumer USA Inc.
Writing for the Court, Justice Gorsuch focused on the statutory language of the FDCPA which defines debt collectors as anyone who “regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 USC § 1692a(6).
The Santander case involved the collection of defaulted automobile loans. Santander Consumer USA Inc. purchased the loans and then attempted to collect on them. A group of consumers filed a putative class action alleging that Santander’s collection methods violated the FDCPA. Santander moved to dismiss on the grounds that it was not a debt collector, but rather a creditor, since it owned the underlying debt.
The narrow question before the Court was whether a debt buyer is subject to the FDCPA. The Supreme Court found in favor of Santander, resolving a circuit split. Citing to the statutory language, the Supreme Court found that the FDCPA defines debt collectors as those who collect debts “owed . . .to another.” Because Santander owned the debt it was collecting, the debt was not owed to another, and therefore under the statutory definition it was not debt collector. The Court noted the statutory definition of creditor as one “who offers” credit and a person “to whom a debt is owed,” as illustrating that the FDCPA acknowledges the distinction between original and current creditor, but then concluded that the language of the statute does not require current creditors to follow the FDCPA.
The decision may have limited application, however. Justice Gorsuch noted that the Court had not reviewed whether Santander should be considered a debt collector because it both collects on debts it purchased, and “regularly acts as a third party collection agent for debts owed to others,” because the consumers did not raise that theory in their petition for certiorari. Thus, the case is limited to those companies that purchase debts, and does not necessarily give comfort to those that also service the debt of others. The Court noted that the current business model of purchasing defaulted debts was not in place in 1977 when the FDCPA was enacted, so the opinion attempted to meld the debt-buying model with the statutory language of the FDCPA. The opinion relies on the meaning of “owed to another,” and states that as to making revisions to the FDCPA: “these are matters for Congress, not this Court, to resolve.”
Last week, Richard Cordray, the director of the Consumer Financial Protection Bureau (“CFPB”), announced that the CFPB will look to revise the FDCPA, eventually aiming to rewrite rules for communications from debt collectors and disclosures to consumers. Cordray indicated that the CFPB would also look at addressing how debt collectors and first-party creditors contact consumers about the correct amount due and owing. Thus, it is possible that such revisions to the FDCPA may eventually moot the Santander decision.