Justices Appear Reluctant to Close Debt Collection Loophole.
'A Supreme Court argument on Tuesday explored a gap in a federal debt collection law, one that consumer groups say allows some debt collectors to engage in abusive tactics. But the justices did not seem inclined to fill the gap.
When Congress enacted the Fair Debt Collection Practices Act in 1977, it imposed strict regulations on firms that collected other companies’ debts. But it did not address the activities of businesses like banks, credit card companies and car dealerships that collect their own debts.
That distinction failed to anticipate an increasingly popular business model, in which companies buy distressed debt outright and then try to collect it.
“The industry has evolved in a way that has raised these sorts of questions,” Chief Justice John G. Roberts Jr. said. “This is not something that Congress was addressing.”
The case, Henson v. Santander Consumer USA, No. 16-349, concerns car loans made by CitiFinancial. At first, Santander Consumer USA serviced the loans, collecting payments and pursuing borrowers who were behind in their payments.
Santander later bought CitiFinancial’s defaulted loans outright and started to try to collect. Several borrowers sued, saying Santander had violated the debt collection law by making false statements and by communicating directly with consumers it knew were represented by a lawyer.
Santander responded that the law did not apply to it. The main legal question in the case was the meaning of a phrase in the law, which defines a debt collector as one who regularly collected debts “owed or due another.”
Kannon K. Shanmugam, a lawyer for Santander, said that “the sole question presented by this case is whether an entity that purchases debts, and then attempts to collect them for its own account, qualifies as a debt collector” under the law.
“The answer to that question,” he said, “is plainly no.”
But Justice Elena Kagan said there was something curious about the case. “It doesn’t make much sense, though, does it?” she asked Mr. Shanmugam.
“Your client serviced this debt and counted as a debt collector at that time,” she said. “And then your client purchased the debt and all of a sudden is not a debt collector.”
“And I guess the question is: What happened in between the time when your client serviced the debt and the time when your client purchased the debt that in any way changed its relationship with the borrower such that Congress wouldn’t be concerned any longer with its behavior?” she asked'>>>
https://www.nytimes.com/2017/04/18/us/politics/supreme-court-debt-collection-loophole.html?
