The Fair Debt Collection Practices Act Doesn’t Apply to a Debt Owner

Learn how the Supreme Court’s decision in Henson et al. v. Santander Consumer USA Inc. could affect debt buyers.

On June 12, 2017, the Supreme Court decided Henson et al. v. Santander Consumer USA Inc., a case that sought an answer to the question of whether a debt buyer must abide by the collection rules outlined in the Fair Debt Collection Practices Act (a body of law that governs "debt collectors"). The Court concluded that the owner of a debt isn’t a debt collector under the Act.

Much of the Court’s analysis focused on the differences between a debt collector and a debt owner. Specifically, under the Act, a debt collector doesn’t own the debts it collects but instead collects on behalf of a third-party debt. By contrast, a debt buyer purchases a debt before attempting to collect it for its own benefit, and therefore, as the owner isn’t a debt collector as defined by the FDCPA. The FDCPA doesn’t apply.

Although the Court’s holding seems straightforward, the Court didn’t explain whether this decision will apply to all debt buyers in every situation. Instead, the Court made clear that it wasn’t considering the debt buyer’s involvement in any other type of collection activity or business and that it wasn’t willing to step into the shoes of Congress to interpret a policy not stated within the Act.

By doing so, the Court might have left the door open for future litigants to argue that the FDCPA applies to a debt buyer that regularly collects its own debts, or that also serves as a debt collector for someone else. Therefore, a cautious debt buyer might want to consult with counsel about whether it would make sense to err on the side of following the Act.

(For more information, read When Creditors Are Subject to Federal Fair Debt Collection Rules.)

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