On June 12, 2017, the U.S. Supreme Court held in Henson v. Santander Consumer USA that the Fair Debt Collection Practices Act does not apply to debt buyers, as opposed to debt collectors working on behalf of loan originators. The unanimous decision, authored by freshman Justice Neil Gorsuch, was based on a fairly straightforward analysis of the statute.
Petitioners had borrowed money from CitiFinancial to buy a car. They later defaulted on the loan. Santander subsequently purchased the defaulted loan from CitiFinancial and attempted to collect the debts in ways that Petitioners believed were unlawful under the Act.
The dispute turned on whether Santander, as a buyer of debt from the loan originator, was a “debt collector” within the meaning of the Act and was, thus, subject to the Act’s constraints on debt collection practices. The Act defines the term “debt collector” to include anyone who “regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 U.S.C. § 1692a(6).
The parties agreed that third-party debt collection agents working on behalf of loan originators generally qualify as “debt collectors” under the Act, while those that seek to collect loans that they originated do not qualify. The issue, however, was whether a third party that purchases a debt from a loan originator—meaning that the debt is now owed to them—and then attempts to collect the debt qualifies as a “debt collector.” The Court held that it does not.
The Court’s analysis of this issue is summarized in a single paragraph:
[B]y its plain terms this language seems to focus our attention on third party collection agents working for a debt owner—not on a debt owner seeking to collect debts for itself. Neither does this language appear to suggest that we should care how a debt owner came to be a debt owner—whether the owner originated the debt or came by it only through a later purchase.
Thus, Santander was not considered a debt collector because it sought to collect a debt on its own behalf, as opposed to a debt “owed . . . another.”
Although it found the statutory language clear, the Court also noted that “reasonable people can disagree with how Congress balanced the various social costs and benefits,” and Congress may choose to “alter the judgments it made in the past” at some point in the future.