The Supreme Court Just Ruled that Debt Buyers are Not Covered by the FDCPA. Now What?
The Supreme Court issued its decision today in Hensen v. Santander Consumer USA Inc., a case that consumer law attorneys like me have been watching closely. At stake was whether debt buyers have to abide by the consumer protections in the Fair Debt Collection Practices Act (FDCPA for short), a federal law that protects people against harassing and abusive debt collection practices. A debt buyer is a person or company who buys a debt from a creditor and then seeks to collect that debt directly from the consumer. In this case, Santander had bought unpaid car loans from CitiFinancial Auto, and claimed that it could not be sued under the FDCPA for abusive practices because it was not a "debt collector" as defined by the statute, and therefore the FDCPA did not apply.
It is commonly understood that the FDCPA does not apply to companies who try to collect debts directly from their own customers. For example, a credit card company who calls you to collect on an overdue payment is not covered by the FDCPA because the credit card company is not collecting on behalf of someone else, but for its own account. The FDCPA was meant to apply to collection agencies and law firms that the credit card company might retain to collect the debt for them, and protects you from harassment by those agencies and law firms. The question the Supreme Court had to answer was whether the FDCPA also reaches companies like Santander that buy debt from other creditors. The difference between Santander in this case and a collection agency is one of ownership - a collection agency does not own the right to receive payment from the consumer; it is only acting as an agent on the creditor's behalf, and is only entitled to receive from the creditor either a fee or a percentage of the amount it recovers. The legal right to be paid stays with the creditor. In most cases, a collection agency cannot sue the consumer in its own name to collect the debt because it does not own the debt.
When the debt is purchased by a company like Santander, the legal right to be paid is transferred from the creditor to the debt buyer, who steps into the creditor's shoes, and now has the right to sue the consumer directly if the debt is not paid. Santander argued, and the court agreed, that because it now owned the debt, it was not trying to collect "for another" and therefore was not a "debt collector" as defined by the statute.
So where does this leave us? Right now, it seems that the FDCPA cannot be relied upon to protect consumers from abusive collection practices from debt buyers who are seeking to collect for their own account. But that doesn't mean your only option, if you are dodging harassing calls from debt buyers, is to throw your phone away. There are other laws, both state and federal, with different types of remedies that a knowledgeable attorney can use to combat the abuse. Very often, the debt bought by debt buyers is not legally enforceable, either because the debt is too old or the account information is outdated, incorrect, or there isn't sufficient paperwork to prove the debt in court. Ultimately, seeking bankruptcy protection may be the best option, which will end the harassment from all creditors, whether debt collectors or otherwise.
If you are facing relentless calls regarding debts you owe, you should speak with a consumer law attorney as soon as possible who can give you an informed opinion as to the best way to handle your creditors and explore options for resolving your debts.