Companies that buy debts originated by others and then collect the debts for themselves are not debt collectors under the Fair Debt Collection Practices Act and therefore are not required to comply with the FDCPA’s consumer protection provisions, according to the Supreme Court. The unanimous opinion in Henson v. Santander Consumer USA Inc.—the first opinion attributed to Justice Gorsuch—affirmed a decision by the U.S. Court of Appeals for the Fourth Circuit (Henson v. Santander Consumer USA Inc.).
According to the Supreme Court opinion, Santander Consumer USA bought defaulted auto loans from CitiFinancial Auto, the original lender. Santander then attempted to collect the loans without complying with the FDCPA’s requirements. The question was whether buying the debts made Santander a company that “regularly collects or attempts to collect . . . debts owed or due” someone else, i.e. whether it made Santander a debt collector (15 U.S.C. §1692a(6)).
The text of the FDCPA makes clear that “All that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another’,” the opinion said. How the debt owner came to own the debt, whether by origination or by purchase, is irrelevant.
Parsing the text. The consumers attempted to rely on the FDCPA’s use of “owed . . . another,” which they argued covered any debts that previously were owed to someone other than the current owner. If Congress intended to exclude debt buyers from the definition of debt collectors, the act would have referred to debts “owing . . . another.”
The Court rejected that argument as contrary to both proper grammar and common understanding. After all, the FDCPA actually refers to debts “owed or due . . . another,” the opinion pointed out. Accepting the consumers’ argument would require that to mean “debts that were owed or are due another.” “[S]upposing such a surreptitious subphrasal shift in time seems to us a bit much,” Gorsuch wrote.
The words used elsewhere in the FDCPA did not support the consumers’ position, the opinion added. Congress was able to distinguish between debt originators and debt buyers when it wanted to.
Significance of default. It is true that the FDCPA excludes from its debt collector definition those who buy debts that are not in default, the opinion conceded. However, that did not imply that anyone who bought a debt after default was a debt collector.
Assuming for the sake of argument that a company must be either a debt collector or a creditor, and not both, with respect to a specific debt, there was no reason that a debt buyer like Santander could not be a creditor, the opinion added.
Public policy. The court believed that the consumers preferred to rely on their public policy argument—the FDCPA was intended to protect consumers from improper tactics by independent debt collectors, and furthering that purpose required applying the act to debt buyers. However, the consumers also conceded that debt buying arose after the FDCPA was enacted, the opinion observed, which meant that Congress never had the opportunity to consider whether the practice should be covered.
“[I]t is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done had it faced a question that, on everyone’s account, it never faced,” Gorsuch wrote. Regardless of the public policy argument urged by the consumers, it had to be presumed that the FDCPA text meant what it said.
Excluded questions. Gorsuch’s opinion also noted that two related issues were not being considered. The Court was not addressing whether Santander should be considered a debt collector because, regardless of the ownership of these debts, it does regularly collect debts owned by other persons. Neither was it addressing whether the company was a debt collector because it was engaged in a business that had debt collection as its principal purpose.
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