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SCOTUS Affirms that FDCPA is Not Applicable to Debt Buyers

On June 12, 2017, the Supreme Court issued an opinion in Henson v. Santander Consumer USA, Inc., Case No. 16-349. In his first opinion since joining the Supreme Court, Justice Gorsuch wrote for a unanimous panel finding that the Fair Debt Collection Practices Act (FDCPA) did not apply to entities and individuals that purchased defaulted debt. 

In Henson, Santander Consumer USA purchased a defaulted auto-loan owed by Henson. Henson later claimed that Santander violated various aspects of the FDCPA in attempting to collect the defaulted debt. Santander argued that it was not subject to the FDCPA since it was not attempting to collect a debt on behalf of another, but rather for its own interest as the owner of the debt. The District Court and Fourth Circuit Court of Appeals agreed and affirmed that Santander did not qualify as a debt collector because it didn’t regularly seek to collecte debts owed to another. The Court found that when determining who qualifies as a debt collector “[a]ll that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another’.” In reaching that determination, the Court undertook a grammatical analysis centered on the tense of the word “owed” in the statute rejecting a claim that the past-tense usage in the FDCPA reflected a congressional intent to exempt only original debt holders. The opinion reflected a refreshing and straightforward tone in addressing the arguments of counsel suggesting a style that would appeal to a broad audience, not just scholars.   

Overall, the decision is beneficial to the growing debt-buying industry insomuch as it provides that a party collecting its own debt is not subject to the FDCPA. 

A copy of the Court’s decision is available here

  • Partner

    Andrew Sayles defends financial institutions and their service partners in complex litigation and class actions, with a particular emphasis on issues related to consumer financial services regulation. He also advises clients in ...

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