Henson v. Santander Consumer USA Inc.
2017 U.S. LEXIS 3722, 198 L. Ed. 2d 177, 137 S. Ct. 1718 (2017)
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Rule of Law:
A company that purchases a defaulted debt and seeks to collect that debt for its own account is not a "debt collector" subject to the Fair Debt Collection Practices Act's primary definition.
Facts:
- CitiFinancial Auto loaned money to petitioners for the purpose of buying cars.
- The petitioners subsequently defaulted on those car loans.
- Santander Consumer USA Inc. purchased the petitioners' defaulted loans from CitiFinancial Auto.
- After purchasing the loans, Santander sought to collect the debt from the petitioners for its own account.
Procedural Posture:
- Petitioners filed suit against Santander in a federal district court, alleging violations of the Fair Debt Collection Practices Act.
- The district court ruled in favor of Santander, holding that the company did not qualify as a "debt collector" under the relevant statutory definition.
- Petitioners, as appellants, appealed the district court's decision to the U.S. Court of Appeals for the Fourth Circuit.
- The Fourth Circuit affirmed the district court's judgment for Santander, the appellee.
- The U.S. Supreme Court granted the petitioners' writ of certiorari to resolve a conflict among the circuit courts on this issue.
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Issue:
Does a company that regularly purchases defaulted debts and then seeks to collect them for its own account qualify as a "debt collector" under the Fair Debt Collection Practices Act's primary definition, which covers those who regularly collect debts "owed or due ... another"?
Opinions:
Majority - Justice Gorsuch
No. A company that purchases and collects on a debt for its own account does not qualify as a "debt collector" under the primary statutory definition because it is not collecting a debt "owed or due ... another." The court's reasoning is grounded in a textualist interpretation of the Fair Debt Collection Practices Act (FDCPA). The plain meaning of the phrase "owed or due ... another" refers to a present state; it applies to third-party collection agents collecting debts for the current owner, not to the current owner collecting for itself. The court rejected the petitioners' argument that the past participle "owed" should be read to mean debts that were previously owed to another, explaining that past participles are commonly used as adjectives to describe a present condition. Furthermore, the court noted that other parts of the FDCPA use "owed" to refer to a present debt relationship, and when Congress intended to distinguish between debt originators and debt purchasers, it did so explicitly. The court declined to speculate about congressional policy preferences regarding the modern debt-buying industry, stating its role is to apply the statute as written, not to amend it.
Analysis:
This decision significantly narrows the applicability of the FDCPA's primary definition of "debt collector," providing a clear safe harbor for the rapidly growing debt-buying industry. By focusing on the present ownership of the debt rather than its origin or default status, the Court distinguishes debt owners from third-party collection agents. This ruling effectively exempts entities that purchase defaulted debt and collect on it themselves from the FDCPA's restrictions under this specific definition. Consequently, future litigation will likely focus on the FDCPA's alternative "principal purpose" definition of a debt collector to determine if these entities can be regulated under that prong of the statute.
