In a unanimous opinion written by Justice Neil M. Gorsuch, the Supreme Court ruled today that someone who purchases a defaulted debt is not a “debt collector” and is therefore not subject to the federal Fair Debt Collection Practices Act, or FDCPA.
The case, Henson v. Santander Consumer USA Inc., was argued on April 18, the second day Justice Gorsuch sat on the bench after being sworn in the week before as the high court’s 113th justice. The opinion was Justice Gorsuch’s first for the Supreme Court, even though he did not ask a single question or make any comments at oral argument.
Santander had purchased a portfolio of defaulted auto loans from a bank. The district court and the Fourth Circuit both held that Santander was not a “debt collector” and thus not subject to the regulations and remedies afforded to consumers under the FDCPA. The Supreme Court granted certiorari to resolve a split because other circuits had held that purchasing debt did not give a debt collector immunity from the FDCPA.
The FDCPA only applies to debt collectors, a term defined in 15 U.S.C. § 1692a(6) as anyone who “regularly collects or attempts to collect . . . debts owed or due . . . another.” Justice Gorsuch set about deciding how to classify entities “who regularly purchase debts originated by someone else and then seek to collect those debts for their own account.” He framed the question as whether the FDCPA treats “the debt purchaser . . . more like the repo man or the loan originator?”
Justice Gorsuch said the “plain language” of the definition “focuses our attention on third party collection agents working for a debt owner – not on a debt owner seeking to collect debts for itself.” He said the statute “does not appear to suggest that we should care how a debt owner came to be a debt owner.”
“All that matters,” he said, “is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another.’” That analysis, he said, “would seem” to mean that a debt purchaser does not fall under the statutory definition.
Justice Gorsuch then launched into a complex statutory and grammatical analysis, focusing largely on the word “owed.” He cited two grammar books alongside the Oxford English Dictionary to debunk the notion that “owed,” a past participle, means a debt previously owed to another.
Harping on the use of the past participle “doesn’t follow even as a matter of good grammar, let along ordinary meaning,” Justice Gorsuch said. Focusing also on how “owed” is used elsewhere in the FDCPA, he could not “see why a defaulted debt purchaser like Santander couldn’t qualify as a creditor” under the “statute’s plain terms.”
The debtor did not fare any better with a policy argument based on the idea that the business of purchasing defaulted debt did not exist when the FDCPA was adopted. The debtor wanted the Court to believe that Congress would have viewed defaulted debt purchasers more like debt collectors than debt originators.
Justice Gorsuch declined to consult a crystal ball because “it is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done.” He said the “proper role of the judiciary” is to “apply, not amend, the work of the People’s representatives.”
The opinion theoretically leaves the door open for a different result in a later case given two questions the Court did not decide. First, the debtor argued that Santander fell under the FDCPA because it regularly collected debts for another. Justice Gorsuch said that question was not raised in the petition for certiorari, and the Court did not agree to review it.
Second, Justice Gorsuch said the Supreme Court had not agreed to address another aspect of the definition of a debt collector in Section 1692a(6), which includes someone “in any business the principal purpose of which is the collection of any debts.”
Today’s decision was the high court’s second venture this term into the FDCPA. On May 15 the Court held 5/3 in Midland Funding LLC v. Johnson, 16-348, 2017 BL 161314, 85 U.S.L.W. 4239 (Sup. Ct. May 15, 2017), that filing a time-barred claim does not violate the FDCPA. To read ABI’s discussion of Midland Funding, click here.