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The Supreme Court Delivers a Unanimous Opinion in favor of Debt PurchasersAuthored by: Michael H. Weaver, Esq.
June 13, 2017

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In today’s political environment, having unanimous support on an issue is exceedingly difficult particularly on issues emanating from our Executive and Legislative branches of government. Hope springs eternal however, and unanimity is exactly what we got from our Judicial branch of government in the United States Supreme Court’s decision in Henson v. Santander Consumer USA, Inc, 582 U.S. ____ (2017) which was decided on June 12th

The Court held (in an opinion written by Justice Gorsuch – his first for the Court) that an entity who regularly purchases debts originated by a third party and then seeks to collect the debt for its own account, does not qualify as a “debt collector” and is therefore not subject to the rigors of the Fair Debt Collection Practices Act (FDCPA). 

In Santander,CitiFinancial Auto loaned money to Henson and other petitioners (collectively, the “Petitioners”) to buy cars. The Petitioners defaulted on those loans, and Santander purchased the defaulted loans from CitiFinancial. Santander then sought to collect the debts in ways the Petitioners alleged were in violation of the FDCPA.

The parties acknowledged that third party debt collection agents generally qualify as “debt collectors” and that those who seek to collect debt they originated do not. Consequently, the former are subject to the FDCPA while the latter are not. But what about individuals and entities who purchase debts originated by a third party and then seek to collect? Does the FDCPA “treat the debt purchaser…more like the repo man or the loan originator”?

The Petitioners argued for an expansive reading of the FDCPA and made the argument that “owed” is the past participle of the verb “to owe,” which suggests that the statute’s definition of debt collector includes anyone who regularly seeks to collect debts previously “owed…another.”

The Court responded to that argument by concluding that the Petitioners’ reading did not follow “good grammar, let alone ordinary meaning.” The Court noted that “[p]ast participles like ‘owed’ are routinely used as adjectives to describe the present state of a thing….” The Court also looked at Congress’ use of the word “owed” in other subsections of the FDCPA and, similarly, found little support for the Petitioners’ argument.  

The Court also considered the Petitioners’ argument that debt purchasers should be subject to the FDCPA for public policy reasons. The Petitioners noted that when passing the FDCPA, “Congress never had the chance to consider what should be done about those in the business of purchasing defaulted debt” and had they known, “it surely would have judged defaulted debt purchasers more like…independent debt collectors.”

The Court quickly disposed of the Petitioners’ policy arguments by noting “[I]t is never our job to rewrite 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.”

The Santander decision represents a win for debt purchasers and provides Supreme Court observers with their first glimpse of Justice Gorsuch’s writing style which, ironically, required parsing through participles.