Following its enaction, the Dodd-Frank Act left the financial services industry with uncertainty in many areas. For nearly 10 years, the industry has wondered and speculated about the inclusion of a prohibition against abusive acts and practices. What exactly is abusive conduct? Is abusive conduct different from false and misleading acts or unfairness? How will the CFPB handle enforcement?
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Under an opinion delivered today by the U.S. Supreme Court, a purchaser of a defaulted debt who then seeks to collect the debt for itself is not a “debt collector” subject to the federal Fair Debt Collection Practices Act.
The issue before the Court was whether a purchaser of defaulted debt meets the FDCPA’s definition of a “debt collector” as one who “regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 U. S. C. §1692a(6).
Here, Santander Consumer USA Inc., acquired defaulted loans from CitiFinancial Auto and then began to collect on those loans. The petitioners argued this activity made Santander a debt collector subject to the FDCPA. The Fourth Circuit Court of Appeals disagreed because the debt purchaser was not seeking to collect a debt “owed . . . another”. The Supreme Court affirmed in a unanimous decision.
The opinion did not consider whether a purchaser of defaulted debt is engaged “in any business the principal purpose of which is the collection of any debts.” §1692a(6). Debt buying companies should consult with their attorneys concerning the ramifications of today's ruling.