• 06/14/2017

    High Court Finds FDCPA Does Not Apply to Individuals and Entities Collecting a Debt on Their Own Account

    Client Alert

    Written by: Brett M. Buterick, Esq.

    On Monday, June 12, 2017, in a major victory for U.S. financial institutions, the United States Supreme Court unanimously ruled that individuals and entities who purchase debts originated by another, whether in default or not, and subsequently collect on the debt on their own account are not “debt collectors” subject to the provisions of 15 U.S.C. §1692, the Fair Debt Collection Practices Act (“FDCPA”). Henson v. Santander Consumer USA Inc., No. 16-349, 2017 WL 2507342 (U.S. June 12, 2017).

    The Court’s ruling is significant as it resolves the application of the definition of “debt collector” under the FDCPA as it relates to the  prohibitions set forth in the statute. Section 1692a(6) defines a "debt collector” as:

    [A]ny person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.

    15 U.S.C. § 1692a(6).

    Courts throughout the country have applied the definition of “debt collector” under § 1692a(6) differently as it relates to  owners of debts purchased post-default resulting in different treatment depending on the circuit where the case was brought. See, e.g., Henson v. Santander Consumer USA, Inc., 817 F.3d 131 (4th Cir. 2016) , cert. granted, 137 S. Ct. 810, 196 L. Ed. 2d 595 (2017), and aff'd, No. 16-349, 2017 WL 2507342 (U.S. June 12, 2017)(non-originating debt holder, not a debt collector under § 1692a(6), despite default status at time debt was acquired)); Davidson v. Capital One Bank (USA), N. A., 797 F. 3d 1309 (11th Cir. 2015) (same); McKinney v. Cadleway Properties, Inc., 548 F.3d 496 (7th Cir. 2008) abrogated by Henson v. Santander Consumer USA Inc., No. 16-349, 2017 WL 2507342 (U.S. June 12, 2017) (purchaser of defaulted debt was “debt collector” subject to requirements of FDCP); F.T.C. v. Check Inv'rs, Inc., 502 F.3d 159 (3d Cir. 2007) abrogated by Henson v. Santander Consumer USA Inc., No. 16-349, 2017 WL 2507342 (U.S. June 12, 2017) (same).

    In Henson, the Fourth Circuit concluded that Santander Consumer USA, Inc. was a creditor, not a debt collector under § 1692a, as Santander was collecting the petitioners’ debt on its own behalf, despite purchasing same from the loan originator post-default. Henson v. Santander Consumer USA, Inc., 817 F.3d 131 (4th Cir. 2016), cert. granted, 137 S. Ct. 810, 196 L. Ed. 2d 595 (2017), and aff'd, No. 16-349, 2017 WL 2507342 (U.S. June 12, 2017). The lower court found Santander sought to collect debts it owned and did not regularly seek to collect debts “owed . . .another,” and thus could not be considered a debt collector subject to FDCPA regulation. Id.

    In Justice Neil Gorsuch’s first written Supreme Court opinion, the Court unanimously upheld the Fourth Circuit’s ruling in favor of Santander Consumer USA, Inc. The Court noted the narrowness of the question presented, as both the petitioner and respondent agreed third-party debt collection agents generally qualify as “debt collectors” under the FDCPA, while institutions operating to collect a debt originated in-house act only on behalf of themselves. Henson v. Santander Consumer USA Inc., No. 16-349, 2017 WL 2507342 at *2 (U.S. June 12, 2017). Accordingly, the only remaining issue for the Court to decide was “how to classify individuals and entities that regularly purchase debts originated by someone else and then seek to collect those debts for their own account.” Id.

    The Court, examining the petitioners’ textually and policy based arguments, rejected same and found the statute cannot contemplate petitioners’ interpretation of the definition. Id. at *3-4. Focusing on the phrase debts “owed . . . another,” the Court held the language does not “appear to suggest that we should care how a debt owner came to be a debt owner— whether the owner originated the debt or came by it only through a later purchase. All that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another.’” Id. at* 3. The Court further found that, since the interpretation argued by counsel for the Borrower lacks textual support, it would need to redraft the legislation to include the petitioners’ reading which is well outside the scope of the Court’s power.  Id. at *4. 


    The decision represents a major victory for financial institutions throughout the United States. Not only does the Court’s holding ease the minds of institutions dealing regularly in the acquisition and/or sale of distressed debt, it also eases burdens on the entire distressed debt marketplace as the looming cloud of potentially frivolous FDCPA action is lifted from the sale and purchase of such assets. Over time, the decision will likely result in an increase in distressed debt trade as the cost of FDCPA litigation is removed from a good portion of transactions.

    The decision also presents a significant economic benefit to those owners of defaulted debt, collecting on their own account, currently involved in FDCPA litigation as the statute’s restrictions clearly no longer applies to them. 

    Hill Wallack LLP’s Creditors’ Rights and Bankruptcy practice group offers strategic and timely advice on all matters affecting buyers and sellers of distressed debt. Our attorneys are seasoned litigators of matters brought under consumer financial protection statutes, having particular in depth knowledge of the entirety of the Fair Debt Collection Practices Act. Our attorneys are experienced navigators of the FDCPA and provide expedient, protective, and efficient solutions to ensure client security and compliance.

    If you have recently been sued under the FDCPA, or have questions or concerns regarding asset sales or acquisitions and the effect of the Court’s recent decision, please contact Michael Kahme, Esq., Telephone: (609) 734-6383; Email:, Thomas W. Halm, Jr., Esq., Telephone (609) 734-6338; Email:, Eric Kelner, Esq., Telephone (609) 734-4451; Email:, or Brett M. Buterick, Esq., Telephone (609) 734-6330; Email: