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06.14.17 by Andrew Shafer

Does the FDCPA apply to debt buyers collecting their own debts?


Case Note: Henson v Santander Consumer USA

On June 12, 2017, the Supreme Court issued its decision in Henson v Santander Consumer USA. (16-349), 582 U.S. ____, ____ S.Ct. _____, ____ L.Ed2d ____. In a nutshell, Santander purchased debts in default. It collected the same on its own behalf. In interpreting 15 U.S.C. §1692a(6), a unanimous court concluded that Congress never intended the Fair Debt Collection Practices Act to apply to debt buyers who collected their own debts. This decision resolves the conflict between various federal circuit courts. Going forward, debt buyers are not obligated to adhere to the FDCPA’s prohibited practices.

Sounds good? Not quite. The decision did not resolve the question of whether third-party debt collectors who also buy debt must continue to follow the FDCPA (at least with regard to the purchased debt). Also unanswered was the question of whether the court’s decision will moderate the Consumer Financial Protection Bureau’s current collection-agency rulemaking process or its UDAAP regulations. As of June 12, 2017, the CFPB website has not addressed the Henson decision.

Finally, even though debt buyers may no longer be regulated by the FDCPA, Henson does not affect the police power of the states to regulate debt buyers, so long as the state regulations do not conflict with the federal regulations. On its face, Henson does not prohibit the states from treating debt buyers as debt collectors.

The extent to which Henson creates a safe harbor for debt buyers is uncertain, particularly when measured against the CFPB’s appetite for expanded regulation. Stay tuned as the district courts grapple with the limitations of this important decision. Until lower court decisions begin digesting and applying Henson, the cautious approach is to assume that debt buyers will continue to be subject to regulatory oversight by the CFPB and by state agencies that regulate the debt collection industry.