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Henson v. Santander Consumer USA

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Supreme Court of the United States
Henson v. Santander Consumer USA Inc.
Reference: 16-349
Issue: Fair Debt Collection Practices Act
Term: 2016
Important Dates
Argued: April 18, 2017
Decided: June 12, 2017
Outcome
Fourth Circuit Court of Appeals affirmed
Vote
9-0 to affirm
Majority
Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan • Neil Gorsuch


Henson v. Santander Consumer USA Inc. is a case argued during the October 2016 term of the U.S. Supreme Court. Argument in the case was held on April 18, 2017. The case came on a writ of certiorari to the United States Court of Appeals for the 4th Circuit. On June 12, 2017, in the first opinion by Neil Gorsuch as a U.S. Supreme Court justice, the court unanimously affirmed the judgment of the Fourth Circuit.

In the case, the court held that the Fair Debt Collection Practices Act's (Act) restrictions on debt collectors does not include companies that purchase debts which they subsequently collect on their own behalf. In other words, companies that purchase debts and later collect those debts themselves are treated as creditors under the Act and are not subject to the same restrictions placed on entities defined as debt collectors under the Act.

HIGHLIGHTS
  • The case: A federal law, the Fair Debt Collection Practices Act (FDCPA), regulates the manner in which debt collectors can pursue repayment of debts. The law distinguishes between debt collectors and creditors. Creditors are not subject to restrictions for collection under the Act. Ricky Henson, who had an outstanding balance on a debt in default, alleged that Santander engaged in illegal debt collection practices under the Act as a debt collector after Santander purchased his loan. Santander argued that, as owners of the loan, they were engaging as creditors seeking repayment of a loan owed to them. A federal district court dismissed Henson's claim against Santander, finding Santander was categorized as a creditor under the FDCPA. A three-judge panel of the Fourth Circuit Court of Appeals affirmed.
  • The issue: Are debt buyers categorized as creditors or debt collectors under the FDCPA?
  • The outcome: On June 12, 2017, in the first opinion by Justice Neil Gorsuch, the court unanimously affirmed the judgment of the Fourth Circuit Court of Appeals.


    • In brief: Ricky Henson was one of four similarly situated individuals involved in a class action against Santander Consumer USA, Inc. (Santander). Henson financed a car loan through CitiFinancial Auto on which he later defaulted. CitiFinancial Auto sold Henson's loan to Santander as part of a bundle of loan receivables Santander purchased. As part of its business, Santander buys such receivables at a discount and subsequently pursues repayment from those with outstanding balances. Henson filed a lawsuit in federal district court alleging that Santander engaged in illegal debt collection practices as a debt collector under the Fair Debt Collection Practices Act (FDCPA). Santander, as a debt buyer, argued that the statute categorized Santander as a creditor because Santander wasn't collecting debts on behalf of a third-party creditor but was instead collecting on debts which Santander itself owned. The court dismissed Henson's suit. A three-judge panel of the Fourth Circuit Court of Appeals affirmed. Argument in the case was held on April 18, 2017.

    You can review the Fourth Circuit's opinion here.[1]

    Click on the tabs below to learn more about this Supreme Court case.

    Case

    Background

    This was a case about how the Fair Debt Collection Practices Act (FDCPA) categorizes debt buyers under the law. At issue was whether debt buyers are categorized as creditors or as debt collectors.

    Ricky Henson was one of four similarly situated individuals involved in a class action against Santander Consumer USA, Inc. (Santander). Henson financed a car loan through CitiFinancial Auto and he later defaulted on the loan. CitiFinancial Auto sold Henson's loan to Santander in December of 2011 as part of a bundle of loan receivables totaling $3.55 billion dollars. As part of its business, Santander buys such receivables at a discount and subsequently pursues repayment from those with outstanding balances. Henson brought suit against Santander alleging that Santander engaged in illegal debt collection practices under the FDCPA.[1]

    Under the law, the terms creditor and debt collector are defined thusly:[2]

    “

    The term 'creditor' means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another. ...
    The term 'debt collector' means 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. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. [3]

    		”

    Henson argued because Santander received a transfer of debt in default that Santander qualified as a debt collector under the FDCPA. Santander filed a motion to dismiss Henson's complaint in federal district court, arguing that Henson had failed to demonstrate that Santander was a debt collector under the statute. Santander argued that the statute defined Santander as a creditor because Santander wasn't collecting debts on behalf of a third-party creditor but was instead collecting on debts which Santander itself owned. The court granted Santander's motion. Henson appealed to the Fourth Circuit Court of Appeals.[1]

    On appeal, a three-judge panel of the Fourth Circuit affirmed the district court's dismissal. The panel rejected Henson's argument that, in acquiring the debts from CitiFinancial Auto when the loans were in default, this categorized Santander as a debt collector under the Act. Further, the panel held that as Santander was collecting on loans which Santander owned and as Santander did not regularly collect debts for other entities, Santander was acting as a creditor under the law.[1]

    Petitioner's challenge

    Ricky Henson, the petitioner, challenged the holding of the United States Court of Appeals for the 4th Circuit that Santander is a creditor under the FDCPA and not a debt collector.

    Certiorari granted

    On September 16, 2016, Ricky Henson, the petitioner, initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the United States Court of Appeals for the 4th Circuit. The U.S. Supreme Court granted Henson's certiorari request on January 13, 2017. Argument in the case was held on April 18, 2017.[4]

    Arguments


    Question presented

    Question presented:

    "Whether a company that regularly attempts to collect debts it purchased after the debts had fallen into default is a 'debt collector' subject to the Fair Debt Collection Practices Act?"[4]


    Audio

    • Audio of oral argument:[5]



    Transcript

    • Transcript of oral argument:[6]

    Outcome

    Decision

    On June 12, 2017, in the first opinion by Neil Gorsuch as a U.S. Supreme Court justice, the court unanimously affirmed the judgment of the Fourth Circuit. In the case, the court held that the Fair Debt Collection Practices Act's (Act's) restrictions on debt collectors does not include companies that purchase debts which they subsequently collect on their own behalf and for their own accounts.[7]

    Opinion

    In his opinion for the court affirming the Fourth Circuit's ruling, Justice Gorsuch noted that it was "hard to disagree with the Fourth Circuit's interpretive handiwork." He went to say,[7]

    “

    After all, the 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. Neither does this language appear to suggest that we should care how a debt owner came to be a debt owner— whether the owner originated the debt or came by it only through a later purchase. All that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for 'another.' And given that, it would seem a debt purchaser like Santander may indeed collect debts for its own account without triggering the statutory definition in dispute, just as the Fourth Circuit explained.[3]

    		”

    Justice Gorsuch subsequently addressed an argument made by the petitioners in the case that the debt buying market has increased since the Act's passages in 1977. Justice Gorsuch noted that[7]

    “

    while it is of course our job to apply faithfully the law Congress has written, it is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done had it faced a question that, on everyone’s account, it never faced. ... We have no difficulty imagining, for example, a statute that applies the Act’s demands to anyone collecting any debts, anyone collecting debts originated by another, or to some other class of persons still. Neither do we doubt that the evolution of the debt collection business might invite reasonable disagreements on whether Congress should reenter the field and alter the judgments it made in the past. 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.[3]

    		”

    As a result of the court's opinion, the judgment of the Fourth Circuit Court of Appeals was affirmed.

    Concurring opinions

    There were no concurring opinions filed in this case.

    Dissenting opinions

    There were no dissenting opinions filed in this case.

    The opinion


    Filings

    The U.S. Supreme Court granted Henson's certiorari request on January 31, 2017.

    Merits filings

    Parties' briefs

    • Ricky Henson, the petitioner, filed a merits brief on February 17, 2017.
    • Santander Consumer USA Inc., the respondent, filed a merits brief on March 20, 2017.

    Amicus curiae briefs

    The following groups filed amicus curiae briefs in support of the petitioner, Ricky Henson:

    • Brief of the Jerome N. Frank Legal Services Organization at Yale Law School
    • Brief of the National Consumer Law Center et al.

    The following groups filed amicus curiae briefs in support of the respondent, Santander Consumer USA Inc.:

    • Brief of ACA International
    • Brief of the Clearing House Association LLC et al.

    Certiorari filings

    Parties' filings

    • Ricky Henson, the petitioner, filed a petition for certiorari on September 16, 2016.
    • Santander Consumer USA Inc., the respondent filed a brief in opposition to certiorari on November 16, 2016.

    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 U.S. Court of Appeals for the Fourth Circuit, Ricky Henson et al. v. Santander Consumer USA, Inc. et al., decided March 23, 2016
    2. ↑ Cornell University's Legal Information Institute, "15 U.S. Code § 1692a - Definitions," accessed April 13, 2017
    3. ↑ 3.0 3.1 3.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    4. ↑ 4.0 4.1 Supreme Court of the United States, Henson v. Santander Consumer USA, January 13, 2017
    5. ↑ Supreme Court of the United States, Henson v. Santander Consumer USA, Inc., argued April 18, 2017
    6. ↑ [https://www.supremecourt.gov/oral_arguments/argument_transcripts/2016/16-349_e29g.pdf Supreme Court of the United States, Henson v. Santander Consumer USA, argued April 18, 2017
    7. ↑ 7.0 7.1 7.2 Supreme Court of the United States, Henson et al. v. Santander Consumer USA, Inc., June 12, 2017
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