U.S. Supreme Court’s Landmark Decision in Favor of Default Debt Buyers is Significant Win For Financial Services Industry


6/12/2017 1:00:00 PM

Unanimous Ruling in Henson v. Santander Consumer USA Inc. Holds that Defaulted Debt Purchasers are Not Subject to FDCPA

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The U.S. Supreme Court’s unanimous decision to refuse to extend the Fair Debt Collection Practices Act (FDCPA) to banks and other firms collecting default debt originated by another company is welcome news to ACA International, the Association of Credit and Collections Professionals. Today, the U.S. Supreme Court continued to redefine the scope of the FDCPA with its highly anticipated ruling in the case of Henson v. Santander Consumer USA Inc., 817 F.3d 131 (4th Cir. 2016) (U.S. Supreme Court No. 16-349). Affirming the Fourth Circuit Court of Appeals, the Supreme Court decided 9-0 in favor of credit and collection industry participants. 

In response to the ruling, ACA International CEO Patrick J. Morris released the following statement:

“ACA International applauds the U.S. Supreme Court for recognizing that companies, like Santander Consumer U.S.A. Inc., who do not collect debts owed or due another do not satisfy the substantive definition of ‘debt collector’ and, therefore, fall outside of the FDCPA’s intended scope.”

“While it is premature to assess the total effect this ruling will have on the debt collection industry and related FDCPA litigation, the Supreme Court’s opinion in Henson is decidedly one of the most significant impacting the FDCPA going forward,” Morris said.  

Questions regarding the scope of the FDCPA, illustrated by the Henson case, are arising at the same time that the debt collection regulatory landscape—for both first- and third-party collection issues—is undergoing a seismic shift as the Consumer Financial Protection Bureau continues to seek to regulate debt collection activities. 

“This case is important because the Supreme Court’s decision today may noticeably reduce litigation against many operating in the consumer finance and debt collection space, and because it may impact debt collection regulation and enforcement at the state level,” Morris said.  

The key issue in Henson was whether a company that regularly attempts to collect debts it purchased after the debts had fallen into default is a debt collector covered by the FDCPA.  The high court said “no,” concluding that a company may collect debts that it purchased for its own account without triggering the FDCPA. 

On March 27, 2017, ACA International submitted an amicus (friend of the court) brief to the U.S. Supreme Court, urging it to affirm the Fourth Circuit’s judgment. 

The Henson consumers filed a class action against Santander, alleging that it violated the FDCPA by engaging in abusive, harassing and deceptive attempts to collect the defaulted debts.  The consumers alleged that Santander was a consumer finance company that acquires defaulted debt for a “few cents on the dollar” and, therefore, was a “debt collector” under the FDCPA.  Santander moved to dismiss the consumers’ complaint on the basis that Santander did not meet the definition of “debt collector” under the FDCPA.  On appeal, the Fourth Circuit held that the consumers had not alleged that Santander was acting as a debt collector under the FDCPA.  Because the consumers alleged that Santander purchased and, thus, owned the debt, Santander was not collecting on behalf of another, and the FDCPA does not apply to creditors who collect debts on their own accounts.

ACA International (ACA), the association of credit and collection professionals, is the largest membership organization in the credit and collection industry. Founded in 1939, ACA brings together third-party collection agencies, law firms, asset buying companies, creditors and vendor affiliates, representing tens of thousands of industry professionals. ACA produces a wide variety of products, services and publications, including educational and compliance-related information; and articulates the value of the credit and collection industry to businesses, policymakers and consumers. www.acainternational.org.

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