- Resolving the FDCPA Circuit Split: Purchasers, Participles, and Policy
- July 19, 2017
On June 12, 2017, the United States Supreme Court held that purchasers of debts originated by another are not “debt collectors” under the Fair Debt Collection Practices Act (FDCPA). Henson v. Santander Consumer USA Inc., No. 16–349, 2017 WL 2507342 (U.S. June 12, 2017). Justice Gorsuch, in his first opinion, writes the Court found it “hard to disagree with the Fourth Circuit’s interpretive handiwork.” The opinion came down to a textual and grammatical interpretation of Congress’s 1977 statute. A unanimous court decided respondent Santander did not qualify as a debt collector under the FDCPA because it does not regularly seek to collect debts “owed . . . another.” Id. at *3.
In Henson, four Maryland consumers, the petitioners, brought action against Santander. The petitioners obtained car loans from CitiFinancial Auto and subsequently defaulted on those loans. Santander purchased the defaulted loans from CitiFinancial Auto and then attempted to collect on the loan in ways the consumers alleged were prohibited under the FDCPA.
Petitioners argued that the word “owed” is the past participle of the verb “to owe,” and therefore the FDCPA’s definition of debt collector captures anyone who regularly seeks to collect debt which was at any point in time “owed . . . another.” The Court was not persuaded by petitioners’ grammatically incorrect interpretation of the statute. Instead, the Court reasoned that past participles liked “owed” are often used as adjectives to refer to the present state of things—and therefore Santander could not be a debt collector because it did not regularly seek to collect debts currently “owed . . . another.”
This Court’s unanimous opinion resolves a split between the Third, Fourth, Seventh, and Eleventh Circuit Courts on the issue of whether entities that purchase a debt originated by another company and then collect on the purchased debt meet the statutory definition of debt collector. Compare Henson v. Santander Consumer USA, Inc., 817 F.3d 131 (4th Cir. 2016) (case below), and Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309, 1315–1316 (11th Cir. 2015) (bank that regularly collected debts originally owed to another was not a “debt collector” where bank’s collection efforts related only to debts owed to it), with McKinney v. Cadleway Properties, Inc., 548 F. 3d 496, 501 (7th Cir. 2008) (where buyer of delinquent loan originally issued by another lender was found to be a “debt collector”), and FTC v. Check Investors, Inc., 502 F. 3d 159, 173–174 (3d Cir. 2007) (holding that Check Investors, a purchaser of checks written on accounts with insufficient funds, was a “debt collector” even though it owned the checks). The Court clearly indicated this decision would not address an alternative statutory definition of the term “debt collector” raised by the petitioners late in litigation. 2017 WL 2507342 at *3.
Finally, petitioners appealed to policy concerns, arguing that if Congress had foreseen the growth of the market for defaulted debt, it would have mandated the same rules for both defaulted debt purchasers and independent debt collectors. The Supreme Court found that it was within Congress’s authority to resolve that issue should it choose, but it was not for the Court to do so. Thus, unless and until Congress amends the FDCPA, purchasers of defaulted consumer debt who collect the debt themselves do not meet the statutory definition of debt collector.Special thanks to Claudia Ojeda¥ for her valuable contribution to this GT Alert.
¥Not admitted to the practice of law.