Many banks, investors and other business entities can take comfort from the recent U.S. Supreme Court decision issued June 12, 2017 in Henson v. Santaner Consumer USA Inc., 137 S.Ct. 1718 (2017), which held that an owner of debt purchased from the debt’s originator for the purchaser’s own account does not automatically become a “debt collector” as defined under 15 U.S.C. §1692a(6) of the Fair Debt Collection Practices Act (“FDCPA”). In affirmation of a ruling of the Fourth Circuit Court of Appeals and the lower United States District Court, the opinion written by Justice Gorsuch reviews and interprets the statutory definition of a “debt collector” as requiring the holder of the debt be someone who “regularly collects or attempts to collect . . . debts owed or due . . . another.” Framing the issue, Justice Gorsuch distinguished the act of owning debt purchased from a debt originator from those businesses that regularly serve to collect on debts owned by the debt originator:
Even when it comes to that question, the parties agree on at least part of an answer. Both sides accept that third party debt collection agents generally qualify as “debt collectors” under the relevant statutory language, while those who seek only to collect for themselves loans they originated generally do not. These results follow, the parties tell us, because debt collection agents seek to collect debts “owed . . . another,” while loan originators acting on their own account aim only to collect debts owed to themselves. All that remains in dispute is how to classify individuals and entities who regularly purchase debts originated by someone else and then seek to collect those debts for their own account. Does the Act treat the debt purchaser in that scenario more like the repo man or the loan originator?
For their part, the district court and Fourth Circuit sided with Santander. They held that the company didn’t qualify as a debt collector because it didn’t regularly seek to collect debts “owed . . . another” but sought instead only to collect debts that it purchased and owned. At the same time, the Fourth Circuit acknowledged that some circuits faced with the same question have ruled otherwise -- and it is to resolve this conflict that we took the case. Compare 817 F. 3d 131, 133 - 134, 137 - 138 (2016) (case below); Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309, 1315 - 1316 (CA11 2015), with McKinney v. Caldeway Properties, Inc., 548 F. 3d 496, 501 (CA7 2008); FTC v. Check Investors, Inc., 502 F. 3d 159, 173–174 (CA3 2007).
Id., at 1721. Rejecting the efforts by the consumer bar to create a broader scope for the definition of “debt collector,” Justice Gorsuch’s opinion focused solely on whether the debt is owned by the person or entity collecting thereon, fully adopting the lower court’s rationale:
[W]e begin, as we must, with a careful examination of the statutory text. And there we find it hard to disagree with the Fourth Circuit’s interpretive handiwork. After all, the Act defines debt collectors to include those who regularly seek to collect debts “owed ... another.” And by its plain terms this language seems to focus our attention on third party collection agents working for a debt owner -- not on a debt owner seeking to collect debts for itself. Neither does this language appear to suggest that we should care how a debt owner came to be a debt owner -- whether the owner originated the debt or came by it only through a later purchase. All that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for “another.” And given that, it would seem a debt purchaser like Santander may indeed collect debts for its own account without triggering the statutory definition in dispute, just as the Fourth Circuit explained.
Until Congress take action to change the statutory definition, purchasers and owners of debt collecting on their own account, and not for another, are not a “Debt Collector” subject to the FDCPA.
By Rick Leighton
Leighton Hetland PLLP