On Monday, Justice Neil Gorsuch showed off his fondness for alliteration, canons of statutory construction and folksy writing in his first opinion as a member of the Supreme Court. In Henson v. Santander Consumer USA Inc., No. 16-349, a unanimous US Supreme Court ruled that a company that purchases a defaulted loan and itself attempts to collect on that loan is not a "debt collector" within the meaning of the Fair Debt Collection Practices Act.
The FDCPA permits private causes of action and liability for certain conduct by "debt collector[s]." The Court held that a company that purchases a loan and attempts to collect on that debt is not a "debt collector" because the company is not attempting to collect a "debt owed or due . . . another." 15 U.S.C. § 1692a(6). The Court affirmed a decision of the US Court of Appeals for the Fourth Circuit and, in doing so, resolved a split among the federal courts of appeals on the issue.
This case involves an allegation that Santander Consumer USA, Inc. used collection methods that violated the FDCPA when it attempted to collect on defaulted auto loans from the petitioners. After the petitioners defaulted on those loans, CitiFinancial Auto sold those debts to Santander, which then attempted to collect from the petitioners. The petitioners sued Santander for debt collection practices that purportedly violated the FDCPA. Santander argued that it could not be liable under the FDCPA because it was not a "debt collector" as defined in the FDCPA.
With Justice Gorsuch writing for the Court, the Court affirmed the Fourth Circuit's decision that companies like Santander, which are collecting on debt they purchased, are not "debt collector[s]." The Court applied a conventional statutory analysis to the question presented, walking through the plain language of the statute, contrasting that language with similar provisions in the FDCPA and reviewing the policy implications of its decision.
Applying the plain language of the statute, the Court concluded that because the debt Santander was attempting to collect was the debt it purchased and owned, it was not a debt "owed . . . another." The plain language, the Court explained, did not "appear to suggest that we should care how a debt owner came to be a debt owner," but instead the focus of the statute was curbing the practices of third-party collection agents. The Court rejected the petitioners' grammatical argument that "owed" is the past participle of the verb "to owe," which meant that a debt collector is someone who is attempting to collect a debt previously owed to another. The Court explained that past participles "are routinely used as adjectives to describe the present state of a thing"; thus, the use of "owed" in the statute is not cabined to debts that were previously owed, but also encompass debts currently owed.
The Court bolstered its reasoning by looking to the words nearby "owed" in the statutory phrase – namely, that a debt collector is one that collects debts "owed or due … another." The use of the word "due," the Court explained, describes a debt currently due at the time of collection. By placing the words owed and due "cheek by jowl," the most natural reading was for those words to be speaking to the same period of time regarding the debt that was being collected. As Justice Gorsuch's use of alliteration explained in rejecting the argument that owed and due refer to two different time periods: "supposing such a surreptitious subphrasal shift in time seems to us a bit much."
The Court also looked to other provisions in the FDCPA to support its analysis. First, the Court explained that in other provisions of the FDCPA Congress differentiated between an "original" creditor and a "current" creditor. But no such distinction was contained in the statutory definition of a "debt collector," undermining the petitioners' argument that a purchaser of debt is a "debt collector" solely because that purchaser was not the credit issuer.
Next, the Court rejected an argument that the FDCPA's exclusion from the definition of "debt collector" of purchasers that "obtain" certain types of debt was dispositive because the debt Santander purchased was not "obtained." The Court explained that the word "obtained can (and often does) refer to taking possession of a piece of property without also taking ownership." Therefore, it "simply isn't the case that a statute's exclusions imply that the phrase 'owed . . . another' must refer to debts previously owed to another."
Lastly, the Court rejected a similar argument from the petitioners that because the FDCPA excluded from the definition of "debt collector" those persons that acquire debt before default necessarily meant that those who acquire debt after default are debt collectors. The key is that the collection must be for "another," not how the debt was acquired.
Lastly, the Court rejected the petitioners' policy-based arguments that, since the passage of the FDCPA in the 1970s, the landscape of debt collection has changed significantly, such that new types of collection schemes are employed to avoid the provisions of the FDCPA. The Court reasoned that, although that may be so, it is not the Court's role to legislate from the bench, but rather to "apply faithfully the law Congress has written."
In deliberate fashion, the Court's opinion marches through the standard canons of statutory construction to reach a unanimous decision. To be sure, there are questions unanswered as to whether a company like Santander may still qualify as a debt collector under certain circumstances. But the Court left those those questions for another day.
Find out more about the implications of this decision for your business by contacting any of the authors.