Equating it to winning a battle, but while still in the midst of a war, a trio of lawyers expressed optimism with the Supreme Court’s ruing this week in Henson v. Santander, but cautioned the industry against thinking that there were nothing but blue skies ahead. The webinar was sponsored by WebRecon.
The Supreme Court ruled this week that Santander Consumer USA is not a “debt collector” as defined by the Fair Debt Collection Practices Act when it purchased defaulted auto loans from CitiFinancial and then tried to collect on them.
The FDCPA only applies to third-party debt collectors, or those that fit the following definition:
- Any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or
- who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.
The Henson ruling only dealt with the second part of the definition – debts owed or asserted to be owed or due another. It did not cover the first part of the definition, also known as the “principal purpose” clause.
For the ARM industry, the win creates new arguments when defending against lawsuits brought by individuals alleging violations of the FDCPA. The ruling will likely not necessitate any changes in the operations at collection agencies, the lawyers said during the webinar. Debt buyers who want to rush out and open their own collection shop as a means of trying to fall into the same classification as Santander should think twice, they said.
“This is a very big victory for at least some entities involved in the industry,” said Scott Wortman, a partner at the law firm of Warshaw Burstein. “There is reason to be bullish in defense litigation. We can now challenge nuanced theories that consumers have used.”
The unanimous ruling from the nine Justices on the Supreme Court perhaps hinted at a new trend in rulings, the panelists said. By limiting themselves to a plain-text reading of the law and opting not to attempt to infer what anyone meant or intended, similar rulings may be on the horizon.
“We have been starved for good legal news,” said Thomas Good, the managing partner at the law firm of Barron & Newburger. “But if I were setting up a debt purchaser today, I would still want them to be compliant with the FDCPA.”
The panelists were strong in pushing that the ruling did not apply to all debt buyers.
“Be mindful that this does not exclude all debt buying companies from the FDCPA,” said Don Maurice, the principal at the law firm of Maurice Wutscher.
Maurice pointed out that a few weeks ago, the Supreme Court ruled on an FDCPA case and the split decision raised questions about how the highest court in the land viewed the debt buying industry. “I was looking for a dissent,” in the Henson case, Maurice said, surprised the Henson decision was unanimous.