The Supreme Court upheld a lower court’s decision that the Fair Debt Collection Practices Act does not apply to debt buyers such as Santander Consumer USA, Justice Neil Gorsuch wrote in his first unanimous majority opinion for the court.
Typically, the act applies to unfair or overly burdensome collections tactics conducted by third party debt collectors. However in Henson v. Santander Consumer USA, the question arose of whether the same regulations applied to the lender after it bought defaulted auto loans on a discount from CitiFinancial Auto and collected on those debts using tactics prohibited under the act.
“Everyone agrees that the term embraces the repo man — someone hired by a creditor to collect an outstanding debt,” Gorsuch wrote in the opinion. “But what if you purchase a debt and then try to collect it for yourself — does that make you a ‘debt collector’ too? That’s the nub of the dispute now before us.”
Both parties agreed that the Fair Debt Collection Practices Act applies to third party debt collectors and does not apply to auto loan originators, because a lender is collecting for debt it originated, rather than “debt owed … another,” as the law states.
Furthermore, there was a grammatical debate in question of whether the word “owed” refers exclusively to debts of the past or debts that are currently outstanding. The plaintiff argued that the statute’s definition of debt collector captures anyone who regularly seeks to collect debts previously owed another, which would naturally encompass debt purchasers such as Santander.
“This much doesn’t follow even as a matter of good grammar, let alone ordinary meaning,” Gorsuch said. “Past participles like ‘owed’ are routinely used as adjectives to describe the present state of a thing — so, for example, burnt toast is inedible, a fallen branch blocks the path, and (equally) a debt owed to a current owner may be collected by him or her.”
Ultimately the court reaffirmed the lower court’s ruling that lenders who purchase debt are not subject to the same regulations under the Fair Debt Collection Practices Act as third parties are.
“Couldn’t a reasonable legislator endorsing the Act as written wonder whether a large financial institution like Santander is any more or less likely to engage in abusive conduct than another large financial institution like CitiFinancial Auto?,” the justice wrote. “We do not profess sure answers to any of these questions, but observe only that the parties and their amici manage to present many and colorable arguments both ways on them all, a fact that suggests to us for certain but one thing: that these are matters for Congress, not this Court, to resolve.”
