The U.S. Supreme Court on Friday agreed to decide whether firms collecting on debt they bought for pennies on the dollar can be held liable in lawsuits brought by debtors they targeted under a federal law cracking down on debt collectors' abusive practices, Reuters reported. The justices agreed to review a lower court's decision to dismiss a consumer class action lawsuit against Santander Consumer USA Holdings Inc. over allegations it violated the Fair Debt Collection Practices Act. The case hinges on the definition of "creditor" and "debt collector" and whether a company that buys debt should be treated as a creditor and therefore not subject to the law. Four Maryland residents who defaulted on car loans filed a proposed class action lawsuit against Santander in 2012 in federal court alleging violations of the debt collection law, such as misrepresenting debt loads and bypassing debtors' lawyers. The debts had been sold to Santander, a Dallas-based vehicle-financing and lending company owned in part by a subsidiary of Banco Santander, the euro zone's second-largest bank by market value. Santander then tried to collect on the loans. The U.S. Court of Appeals for the Fourth Circuit threw out the lawsuit last March, saying that the law applied only to debt collectors, and Santander became a creditor when it purchased the loans. The Maryland residents told the Supreme Court the 4th Circuit's reasoning would "hamper both government and private efforts to combat abusive debt-collection practices." They also noted that appeals courts are divided nationwide on the issue, with some calling debt buyers creditors and others calling them debt collectors. The case is Ricky Henson et al v. Santander Consumer USA, Inc. et al, in the Supreme Court of the United States, No. 16-349. Read more.
In related news, the Supreme Court tomorrow will hear oral argument in Midland Funding, LLC v. Johnson, No. 16-348, in which the court will be looking at:
(1) Whether the filing of an accurate proof of claim for an unextinguished time-barred debt in a bankruptcy proceeding violates the Fair Debt Collection Practices Act;
(2) whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, precludes the application of the Fair Debt Collection Practices Act to the filing of an accurate proof of claim for an unextinguished time-barred debt.
For more information on the case, please click here.
