U.S. Supreme Court Declines to Expand FDCPA
The U.S. Supreme Court agreed to hear a case in which consumers who had defaulted on their car loans and argued that Santander, which had purchased the debts, was acting in violation of the Fair Debt Collection Practices Act (FDCPA). In this case, after the petitioners defaulted on their car loans, Santander purchased those debts from CitiFinancial Auto and attempted to collect on them. Among the central questions the U.S. Supreme Court needed to address was whether a debt buyer, upon purchasing debts as Santander did, looks more like a “creditor” or more like a “debt collector.” The latter would be subject to the FDCPA in ways that a creditor would not.
The case is Henson v. Santander Consumer USA, Inc. The U.S. Supreme Court, which reached a unanimous decision, determined that a company like Santander is allowed to collect debts that it purchased for itself without becoming a “debt collector” under the FDCPA. The decision may impact debtors negatively, and it is important to understand how the court reached its decision.
Third-Party Debt Collectors Versus Creditors
The key question, according to the U.S. Supreme Court’s ruling, was whether a company that purchases debts, aiming to collect for themselves and not for the original creditor, should be treated as “debt collectors” under the definition of the FDCPA. As Justice Gorsuch, who drafted the opinion, explained, the parties generally agreed at the outset on the fact that third-party debt collectors do indeed qualify as debt collectors under the FDCPA and would be barred from the type of collection at the heart of this case.
Justice Gorsuch clearly distinguished third-party debt collectors from creditors for the purposes of the FDCPA. He explained that “debt collection agents seek to collect debts ‘owed . . . another,’ while loan originators acting on their own account aim only to collect debts owed to themselves.” Within this definition, do debt buyers look more like third-party debt collectors or more like creditors?
U.S. Supreme Court Finds in Favor of Debt Buyer
The Fourth Circuit Court of Appeals sided with Santander, finding that the debt buyer looked more like a creditor than a debt collector since it was seeking to collect the debts for its own benefit rather than for another party owed the money. The U.S. Supreme Court agreed and upheld the Fourth Circuit’s ruling. The decision also emphasized that, if changes are to be made concerning how we classify debt buyers, then such changes need to come from Congress and not from the Court.
For debtors, this means that debt buyers are not bound by the FDCPA in the same manner as debt collectors. This distinction might sound like a small one, but it could have significant consequences for debtors who are being contacted by debt buyers like Santander that are seeking to recover.
Contact an Experienced Consumer Protection Attorney in Oak Park
Have you been receiving calls from debt collectors for stale debts or debts you never owed at all? You may be able to file a claim and should discuss your options with an Oak Park consumer protection lawyer. An advocate at our firm can speak with you today. Contact the Emerson Law Firm to learn more about how we can help.
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