The U.S. Supreme Court resolved a federal circuit split in favor of banks and finance companies by holding that firms collecting debts purchased for their own account are not subject to the Fair Debt Collection Practices Act (FDCPA).¹ The unanimous opinion, issued on Monday, June 12, 2017, highlights a significant change to the debt market since the FDCPA was enacted in 1977; namely the creation of a massive market for the purchase of defaulted debt that did not exist at the time of the statute’s enactment. The full opinion of Henson et al. v. Santander Consumer Credit, No. 16–349, can be read here.

Four individuals borrowed money from CitiFinancial Auto to buy automobiles. Each of the individuals defaulted on their loans. Santander Consumer USA Inc. purchased the debt from CitiFinancial Auto for its own account and then proceeded with efforts to collect on the debt. The four individuals then filed suit in the District Court against Santander on behalf of a proposed class of similarly situated consumers and alleged that Santander violated the FDCPA. Both the District Court and the Fourth Circuit Court of Appeals found that Santander didn’t qualify as a debt collector because it did not regularly seek to collect debts “owed . . . [to] another.” 15 U.S.C § 1692a(6).

Section 1692a of Title 15 provides in relevant part:

(6) The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another . . .

Notwithstanding the FDCPA’s fairly simple definition of what is a debt collector, the consumer petitioners urged the Court to expand the Act’s reach to Santander and others that tried to collect on debt purchased for their own account as a matter of good public policy. The petitioners argued that “no other result would be consistent with the overreaching congressional goal of deterring untoward debt collection practices.” The Court, speaking through Justice Gorsuch in his first Supreme Court opinion, rejected the invitation, writing:

All this seems to us quite a lot of speculation. And while it is of course our job to apply faithfully the law Congress has written, it 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.

Finally, the Court delineated two questions that were argued but not included in the petition for certiorari, litigated in any meaningful way below, and which the Court did not agree to consider.

First, petitioners suggest that Santander can qualify as a debt collector not only because it regularly seeks to collect for its own account debts that it has purchased, but also because it regularly acts as a third party collection agent for debts owed to others. Petitioners did not, however, raise the latter theory in their petition for certiorari and neither did we agree to review it. Second, the parties briefly allude to another statutory definition of the term “debt collector”—one that encompasses those engaged “in any business the principal purpose of which is the collection of any debts.” §1692a(6). But the parties have not much litigated that alternative definition and in granting certiorari we did not agree to address it either.

Whether Congress will amend the FDCPA to cover companies like Santander, or whether future certiorari petitions raising these two unanswered questions will come before the Court, remains to be seen. For now, a bank or other company pursuing collection efforts on debt it purchased for its own account may be able to escape liability under the FDCPA.

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Notes:

¹ The Third, Fifth, Sixth, Seventh and D.C. Circuit courts of appeal found that the FDCPA did apply to companies like Santander seeking to collect on purchased debt. The Ninth and Eleventh Circuit courts of appeal found that it did not.