Has the Supreme Court Eroded the Rights of Consumers under the Fair Debt Collection Practice Act?

In Henson v. Santander Consumer USA, Inc., __ U.S. __, 2017 WL 2507342 (June 12, 2017). Justice Gorsuch, writing his first opinion as a Supreme Court Justice for the unanimous Court, ruled that an entity that “regularly” purchases defaulted debts to collect for its own account is not a “debt collector” under the Fair Debt Collection Practices Act (“FDCPA”). While the holding of this case may be scary at first glance for consumers, upon more careful analysis and consideration it is evident that this is a very narrow holding and that experienced consume practitioners should be able to overcome any potential hurdles created by this body of law.

In Henson CitiFinancial loaned money to several individuals seeking to purchase automobiles. When the loans went unpaid, CitiFinancial repossessed and sold them to Santander Consumer USA, and told the individuals they owed the difference between the purchase price and the amount of money for which CitiFinancial sold the debt. Santander attempted to collect the debts. A suit was brought against Santander alleging a violation of the FDCPA. Santander claimed it was not a “debt collector” under the terms of the act because it was seeking to collect on debts that it had purchased, rather than attempting to collect as a third-party.

Pursuant to the FDCPA, 15 U.S.C. § 1692a(6), a debt collector is defined as:

• any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collector of any debts; or

• who regularly collects or attempts to collect, directly or indirectly, debts owed or asserted to be owed or due another.

The Court in Henson only addressed the second definition of debt collector, the Supreme Court expressly noted in Henson that “we do not attempt to” address this “principal purpose” prong because “the parties haven’t much litigated that alternative definition and “in granting certiorari we didn’t agree to address it.” 2017 WL 2507342, *3. Accordingly, Henson does not apply to “principal purpose” debt buyers. In Henson the record was clear that the defendant, Santander, was an auto finance company and its principal business was extending credit. Additionally, Santander owned all legal and equitable rights to the subject debts, it did not qualify under the “regularly collects” part of the definition because the debts that it was collecting were not “owed or due or asserted to be owed or due another.” The Henson opinion does not address entities engaged in “any business the principal purpose of which is the collection of any debts,” and is thus inapplicable to any entities whose principal propose is the collector of debts.

The holding in Henson applies to a very narrow set of circumstances. The impact upon Florida consumers that have had their consumer rights violated will be minimal at best. Plaintiff’s prosecuting fair debt claims need to be cognizant of the Henson ruling and plead with the requisite specificity to ensure that the complaint alleges that the defendant is a debt collector. Additionally, pursuant to the Florida Consumer Collection Practices Act, Fla. Stat. § 559.55 et. seq. (“FCCPA”) a consumer can file an action against all creditors, including original creditors. As such, the impact of this ruling will hopefully be minimal at best for Florida consumers.

If you have been harassed by any person seeking to collect a debt then please contact Sweeney Law, P.A. immediately to protect your rights.

Sweeney Law, P.A. Regularly Represents Consumers that Have Been Harassed by Entities Seeking to Collect Debts

Brendan A. Sweeney, Esq., of Sweeney Law, P.A., The Florida Debt Warrior, regularly represents consumers that have been harassed by entities seeking to collect debts. Brendan A. Sweeney, Esq., has been recognized as a Florida Legal Elite Rising Star Attorney in Consumer Law since 2014 and is a member of the National Association of Consumer Advocates. If you have student loan issues then please contact Sweeney Law, P.A. at 954.440.3993 immediately to protect your rights.