Collector - September 2017 - 42

IAP

SCOTUS Issues Landmark Precedent
for FDCPA in Case Supported by ACA's
Industry Advancement Program
The U.S. Supreme Court unanimously held that defaulted debt buyers are
not debt collectors subject to the FDCPA.
By Karen Scheibe Eliason

T

he U.S. Supreme Court continued
to redefine the scope of the Fair
Debt Collection Practices Act with
its highly anticipated ruling in June in the
case of Henson v. Santander Consumer
USA Inc., 817 F.3d 131 (4th Cir. 2016)
(U.S. Supreme Court No. 16-349).
Affirming the Fourth Circuit Court of
Appeals, the Supreme Court decided 9-0
in favor of credit and collection industry
participants. The key issue in Henson
was whether a company that regularly
attempts to collect debts it purchased
after the debts had fallen into default is a
debt collector covered by the FDCPA.
The high court said "no," concluding
that the FDCPA does not extend beyond
traditional "debt collectors" to those entities
that purchase debts from the original lender
after a consumer account is in default,
commonly known as "debt buyers."
While it is premature to assess the total
effect this ruling will have on the debt
collection industry and related FDCPA
litigation, the Supreme Court's opinion
in Henson is decidedly one of the most
significant impacting the FDCPA.
On March 27, 2017, ACA International
submitted an amicus (friend of the
court) brief on the merits to the U.S.
Supreme Court, urging it to affirm the
Fourth Circuit's judgment and requesting
that it provide clarity to all entities
concerned about FDCPA compliance
with respect to the manner in which
the analysis of whether a company is a
debt collector should be made under the
act's notoriously complex definitional
provisions.

42

In its amicus brief, ACA convincingly
argued that companies, like Santander
Consumer U.S.A. Inc., who do not collect
debts owed or due another do not satisfy
the substantive definition of "debt collector"
and, therefore, fall outside of the FDCPA's
intended scope.
The Supreme Court's ruling in Henson
is largely restricted to a textual analysis of
the relevant federal consumer financial law
to decide the question of whether you are
considered a debt collector if you purchase
a debt and then try to collect it for
yourself. The court said in its opinion that
a plain and careful reading of the FDCPA
reveals that the words "owed ... another"
decided the case.
The court explained that the FDCPA
applies to "debt collectors," which the
statute defines as someone who "regularly
collects or attempts to collect ... debts owed
or due ... another." But if you bought the
debt, the court reasoned, then the debt is
not owed to another. It is owed to you. And,
therefore, the FDCPA does not apply to
those who purchase debts from others and
then tries to collect them.
Delivering the decision for the unanimous
court, newly appointed Justice Neil Gorsuch
wrote in his first Supreme Court opinion:
"[W]e begin, as we must, with a careful
examination of the statutory text. And there
we find it hard to disagree with the Fourth
Circuit's interpretive handiwork. After all, the
Act defines debt collectors to include those
who regularly seek to collect debts 'owed ...
another.' And by 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. All that matters is whether
the target of the lawsuit regularly seeks to
collect debts for its own account or does so for
'another.' And given that, it would seem a debt
purchaser like Santander may indeed collect
debts for its own account without triggering
the statutory definition in dispute, just as the
Fourth Circuit explained."

"In its amicus brief, ACA
convincingly argued
that companies, like
Santander Consumer
U.S.A. Inc., who do
not collect debts
owed or due another
do not satisfy the
substantive definition
of 'debt collector' and,
therefore, fall outside of
the FDCPA's intended
scope."
ACAINTERNATIONAL.ORG


http://www.ACAINTERNATIONAL.ORG

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