Yesterday, the Supreme Court made a landmark ruling in Henson v. Santander Consumer USA Inc. (582 U.S. ____ ). Handing down the decision for the unanimous Court, Justice Neil Gorsuch wrote in his first Supreme Court opinion “[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.”
Does this mean notorious debt-buyers such as Midland Funding, Calvary Portfolio, CACH LLC, and others are off the hook? Maybe not. This decision was very narrow in scope. Justice Gorsuch raised two important, related questions that the Court chose not to answer. First, petitioners suggested that Santander can qualify as a debt collector, because it regularly acts as a third party collection agent for debts owed to others. However, Petitioners did not raise that latter theory in their petition for certiorari and the Court did not agree to review that question.
Second, both petitioners and Santander alluded to another statutory definition of debt collector—one that includes those engaged in “any business the principal purpose of which is the collection of any debts.” §1692(a)(6). The Supreme Court noted however, that the parties did not much litigate that alternative definition and in granting certiorari the Court did not agree to address it. This is where companies like Midland, Cach, Portfolio and the like could still be held liable under the act.
So what does this all mean? A logical interpretation is that debt buyers who regularly engage in the collection of any debt can still be pursued for violating the Fair Debt Collections Practices Act. So for example, a conglomerate company such as Santander that has extremely diversified business practices may be exempt, but other debt buying companies might not. But the Supreme Court did not pass judgment on that question, so the law is still unsettled. What makes this area of law muddled is that a debt collector has multiple definitions under 15 USC 1692(a)(6) and two of the definitions seem to be at odds with each other. Now, it cannot be definitively said that every major debt buyer's principal business purpose is the collection of any debt. No consumer will have that information at their disposal without insider knowledge or discovery. That issue will likely be litigated in the Courts below.