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U.S. Supreme Court: Debt Collectors, Acting On Their Own Behalf, Are Not Subject To The Fair Debt Collection Practices Act

Posted Jun. 21st 2017

By: Christopher R. Gura, Abbott Nicholson, P.C.

The Fair Debt Collection Practices Act (FDCPA) is a federal statute that prohibits troublesome and abusive collection practices by the debt collection industry and authorizes private lawsuits and weighty fines when those restrictions are violated. The FDCPA applies to “debt collectors” – a term that is defined by the Act and encompasses anyone who “regularly collects or attempts to collect … debts owed to or due … another.” 15 U.S.C. § 1692a(6). While it is often easy to discern whether a person or entity fits within the definition of a “debt collector” under the FDCPA, (i.e., a traditional third-party collection company), there has been a conflict of opinion between federal courts around the country as whether the FDCPA applies to entities purchase debt from other entities and then pursues collection on its own behalf.

On June 12, 2017, the United States Supreme Court clarified the issue when it decided Henson v Santander Consumer USA Inc. The purported debt collector in that case (Santander) had purchased a number of defaulted loans from CitiFinancial, and then pursued collection on its own account. The narrow issue before the Court was whether an entity that purchases a debt and then engaged in collection for its own account comes within the purview of the FDCPA’s definition of a “debt collector” and subject to the FDCPA. In a decision written by new Supreme Court Justice Neil Gorsuch, the Court held that Santander was not a “debt collector” within the purview of the FDCPA because, even though the loan was previously originated by another entity, Santander was the owner of the debt and had pursued collection on its own behalf, rather than on behalf of another.

The Court’s ruling in Henson v Santander Consumer USA Inc., therefore, resolved the conflict among the circuits and clarified that those who purchase the debt of another and then seek collect for their own account are not considered “debt collectors” for purposes of the FDCPA.

The attorneys at Abbott Nicholson, P.C. have extensive experience in all aspects of collection and consumer law. If you have any questions about whether your company is subject to the restrictions of the Fair Debt Collection Practices Act, contact Christopher R. Gura or Daniel G. Kielczewski at (313) 566-2500.