The case is Henson v. Santander Consumer USA Inc., U.S. Supreme Court Case No. 16-349, decided June 12, 2017. The case is on appeal from the Fourth Circuit Court of Appeals. The question is whether the Fair Debt Collection Practices Act applies when you “purchase a debt and then try to collect it for yourself.”
The Fourth Circuit says the Act does not apply in such a circumstance. And the unanimous opinion of the Supreme Court affirms the Fourth Circuit’s ruling.
The Henson v. Santander opinion is written by the newest member of the Supreme Court, Justice Neil Gorsuch. And this is his first written opinion as a Supreme Court Justice.
Henson v. Santander is a companion case to the recently-decided Midland Funding v. Johnson opinion by the U.S. Supreme Court on a consumer bankruptcy issue under the Fair Debt Collection Practices Act (see this article on the Midland Funding decision).
The following are excerpts from the new Henson v. Santander opinion that provide a flavor of Justice Gorsuch’s writing style and analysis.
“Disruptive dinnertime calls, downright deceit, and more besides drew Congress’s eye to the debt collection industry” and resulted in “the Fair Debt Collection Practices Act, a statute that authorizes private lawsuits and weighty fines designed to deter wayward collection practices.”
“So perhaps it comes as little surprise that we now face a question about who exactly qualifies as a ‘debt collector’ subject to the Act’s rigors. Everyone agrees that the term embraces the repo man—someone hired by a creditor to collect an outstanding debt. But what if you purchase a debt and then try to collect it for yourself—does that make you a ‘debt collector’ too? That’s the nub of the dispute now before us.”
Everyone agrees on the facts of the case and that Santander, as purchaser of CitiFinancial loans, “sought to collect in ways petitioners believe troublesome under the Act.”
Everyone also agrees that “third party debt collection agents generally qualify as ‘debt collectors’” under the Act, “while those who seek only to collect for themselves loans they originated generally do not.” So, “[a]ll that remains in dispute is how to classify individuals and entities who regularly purchase debts originated by someone else and then seek to collect those debts for their own account.”
“[W]e begin, as we must, with a careful examination of the statutory text. . . . [T]he Act defines debt collectors to include those who regularly seek to collect debts ‘owed . . . another.’ And by its plain terms this language seems to focus our attention on third party collection agents working for a debt owner—not on a debt owner seeking to collect debts for itself. . . . All that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another.’”
Petitioners’ Arguments on Statutory Construction
“Petitioners reply that this seemingly straightforward reading overlooks an important question of tense. They observe that the word ‘owed’ is the past participle of the verb ‘to owe.’ And this, they suggest, means the statute’s definition of debt collector captures anyone who regularly seeks to collect debts previously ‘owed . . . another.’ . . . If Congress wanted to exempt all present debt owners from its debt collector definition, petitioners submit, it would have used the present participle ‘owing.’”
“But this much doesn’t follow even as a matter of good grammar, let alone ordinary meaning. Past participles like ‘owed’ are routinely used as adjectives to describe the present state of a thing—so, for example, burnt toast is inedible, a fallen branch blocks the path, and (equally) a debt owed to a current owner may be collected by him or her. . . . Just imagine if you told a friend that you were seeking to ‘collect a debt owed to Steve.’ Doesn’t it seem likely your friend would understand you as speaking about a debt currently owed to Steve, not a debt Steve used to own and that’s now actually yours?”
“Looking to other neighboring provisions in the Act, it quickly comes clear that Congress routinely used the word ‘owed’ to refer to present (not past) debt relationships. For example, in one nearby subsection, Congress defined a creditor as someone ‘to whom a debt is owed.’ . . . In another subsection, too, Congress required a debt collector to identify ‘the creditor to whom the debt is owed.’ . . . Yet petitioners offer us no persuasive reason why the word ‘owed’ should bear a different meaning here.”
“Congress expressly differentiated between a person ‘who offers’ credit (the originator) and a person ‘to whom a debt is owed’ (the present debt owner). . . . Elsewhere, Congress recognized the distinction between a debt ‘originated by’ the collector and a debt ‘owed or due’ another. . . . And elsewhere still, Congress drew a line between the ‘original’ and ‘current’ creditor. . . . Yet no similar distinction can be found in the language now before us.”
Petitioners argue that “debt purchasers surely qualify as collectors at least when they regularly purchase and seek to collect defaulted debts—just as Santander allegedly did here.” They “point again to the fact that the statute excludes from the definition of ‘debt collector’ certain persons who obtain debts before default.” This exclusion, they suggest, “implies that the term ‘debt collector’ must embrace those who regularly seek to collect debts obtained after default.”
The Court rejects this argument. “For while the statute surely excludes from the debt collector definition certain persons who acquire a debt before default, it doesn’t necessarily follow that the definition must include anyone who regularly collects debts acquired after default. After all and again, under the definition at issue before us you have to attempt to collect debts owed another before you can ever qualify as a debt collector.”
Petitioners’ Arguments on Congressional Intent
“Faced with so many obstacles in the text and structure of the Act, petitioners ask us to move quickly on to policy. Indeed, from the beginning that is the field on which they seem most eager to pitch battle.”
“Petitioners assert that Congress passed the Act in large measure to add new incentives for independent debt collectors to treat consumers well. In their view, Congress excluded loan originators from the Act’s demands because it thought they already faced sufficient economic and legal incentives to good behavior. But, on petitioners’ account, Congress never had the chance to consider what should be done about those in the business of purchasing defaulted debt. That’s because, petitioners tell us, the ‘advent’ of the market for defaulted debt represents ‘one of the most significant changes’ to the debt market generally since the Act’s passage in 1977.”
“[W]e will not presume with petitioners that any result consistent with their account of the statute’s overarching goal must be the law but will presume more modestly instead ‘that [the] legislature says . . . what it means and means . . . what it says.’”
“In the end, reasonable people can disagree with how Congress balanced the various social costs and benefits in this area. . . . After all, it’s hardly unknown for new business models to emerge in response to regulation, and for regulation in turn to address new business models. Constant competition between constable and quarry, regulator and regulated, can come as no surprise in our changing world. But neither should the proper role of the judiciary in that process—to apply, not amend, the work of the People’s representatives.”
“The judgment of the Court of Appeals is Affirmed.”