Supreme Court: Banks That Buy and Hold Debt Are Not ‘Debt Collectors’ under FDCPA

A bank that collects on debts it has bought and holds “for its own account” is not a debt collector under the Fair Debt Collection Practices Act, the Supreme Court ruled today in a unanimous decision. “By defining debt collectors to include those who regularly seek to collect debts ‘owed . . . another,’ the statute’s plain language seems to focus on third party collection agents regularly collecting for a debt owner — not on a debt owner seeking to collect debts for itself,” wrote Justice Neil Gorsuch in his first opinion since joining the court.

In Henson v. Santander, which the American Bankers Association followed closely, Santander Consumer USA purchased defaulted auto loans from CitiFinancial Auto and sought to collect on them. Plantiffs sued Santander, arguing that it counted as a third-party collector under the FDCPA since it had not originated the loans. The court rejected this claim, as had the U.S. district court and the Fourth Circuit Court of Appeals.

In a friend-of-the-court brief filed jointly with other financial trade groups, ABA urged the Supreme Court to reject the plaintiffs’ claims and uphold the rulings of the lower courts.