The U.S. Supreme Court ruled in Henson v. Santander Consumer USA, Inc., that companies that purchase consumer bad debts and then seek to collect them do not automatically qualify as “debt collectors” as defined by the Fair Debt Collection Practices Act (FDCPA). The key question, as identified by the Court, is whether the debt collector was collecting the debt on behalf of itself or another entity. Here, Santander had purchased unpaid debts from CitiFinancial and then attempted to collect on them from the consumers. The consumers sued Santander for alleged violations of the FDCPA. In finding for Santander, the Supreme Court held that once Santander purchased the debt, it was collecting its own debt and not a debt due to another, therefore it was not a debt collector.
The decision is narrow, and the Court declined to address whether other avenues of redress are available to consumers under the FDCPA, therefore it does not necessarily preclude the applicability of the FDCPA to all acts of a debt buyer. However, the decision overrules contrary holdings in four Circuit Courts of Appeal, and effectively eliminates one avenue of redress for consumers who feel that a debt collector has violated the protections afforded by the FDCPA.