Supreme Court Decides Henson v. Santander Consumer USA Inc.

On June 12, 2017, the Supreme Court decided Henson v. Santander Consumer USA Inc., No. 16–349, holding that a company may collect debts that it purchased for its own account without triggering the statutory definition of “debt collector” within the Fair Debt Collection Practices Act.

The Fair Debt Collection Practices Act authorizes private lawsuits and weighty fines designed to deter the wayward practices of “debt collector[s],” a term embracing anyone who “regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 U. S. C. §1692a(6). The complaint filed in the Henson case alleged that Respondent Santander violated the Act by attempting to collect on loans originally made by a third party to Petitioners. However, the Supreme Court affirmed holdings by the district court and Fourth Circuit that Respondent didn’t qualify as a debt collector because it did not regularly seek to collect debts “owed . . . another.” Rather, it instead sought only to collect debts that it had purchased from the third party and thus owned outright.

The Court held that by defining debt collectors to include those who regularly seek to collect debts “owed … another,” the statute’s plain language focused on third-party collection agents, not on debt owners seeking to collect debts for themselves. In so holding, the Court rejected Petitioners’ arguments that use of the past participle “owed” excluded loan originators but embraced debt purchasers, concluding that past participles are routinely used as adjectives to describe the present state of things and that reading the word “owed” to refer to present debt relationships did not render any of the Act’s provisions surplusage.

In addition, the Court rejected Petitioners’ argument that the Act treats everyone who attempts to collect a debt as either a “debt collector” or a “creditor,” but not both. Here, the Court noted that while the Act excludes from the debt collector definition certain persons who acquire a debt before default, it does not necessarily follow that the definition must include anyone who regularly collects debts acquired after default. Moreover, the Court indicated that under the definition at issue, one has to attempt to collect debts owed another before one can ever qualify as a debt collector.

The Court also rejected Petitioners’ argument that their position was more in line with the spirit of the Act because, if Congress had been aware of defaulted debt purchasers like respondent, it would have treated them like traditional debt collectors. The Court explained that it is not its job to rewrite constitutionally valid text and that, in any event, Petitioners’ policy arguments were not unassailable as reasonable legislators might contend both ways on the question of how defaulted debt purchasers should be treated.

Justice Gorsuch delivered the unanimous opinion of the Court.

Download Opinion of the Court