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Consumer Protection – Bundled Auto Loan Buyer Not ‘Debt Collector’

Henson v. Santander Consumer USA Inc. (Lawyers Weekly No. 001-059-16, 21 pp.) (Niemeyer, J.) No. 15-1187, March 23, 2016; USDC at Baltimore, Md. (Bennett, J.) 4th Cir.

Holding:  A company that purchased defaulted auto loans as part of an investment bundle of receivables was acting on its own behalf when it attempted to collect on the loans, and not acting as a “debt collector” covered by the Fair Debt Collection Practices Act; the 4th Circuit affirms dismissal of plaintiffs’ FDCPA suit against the company.

While the Fair Debt Collection Practices Act is a somewhat complex and technical regulation of debt collector practices, we conclude that it generally does not regulate creditors when they collect debt on their own account and that, on the facts alleged by plaintiffs, defendant Santander Consumer USA Inc. became a creditor when it purchased the loans before engaging in the challenged practices.

Plaintiffs alleged that during their efforts to collect on the defaulted loans, Santander and its agents allegedly misrepresented the amount of the debt and their entitlement to collect it. Plaintiffs argued that because 15 U.S.C. § 1692a(4) excludes from the definition of creditor “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,” such person must of logical necessity be a debt collector. Because Santander fits the exclusion from the definition of “creditor,” they argue, it must therefore be a “debt collector.” They maintain that the default status of debt determines whether a purchaser of debt, such as Santander, is a debt collector or a creditor.

FDCPA’s ‘Plain Language’

Plaintiffs’ interpretation of the FDCPA ultimately stands in tension with the Act’s plain language. We conclude the default status of a debt has no bearing on whether a person qualifies as a debt collector under the threshold definition in 15 U.S.C. § 1692a(6). That determination is ordinarily based on whether a person collects debt on behalf of others or for its own account, the main exception being when the “principal purpose” of the person’s business is to collect debt.

Plaintiffs’ complaint alleges that after Dec. 1, 2011, Santander improperly contacted the borrowers directly, misrepresented the amounts owed and misrepresented the fact that Santander was entitled to collect on the auto loans. The complaint does not allege that, when Santander engaged in the allegedly illegal collection practices, it was collecting the debts on behalf of CitiFinancial Auto, plaintiffs’ original lender. It alleges CitiFinancial had sold the loans to Santander.

Because the complaint failed to allege facts demonstrating that Santander was acting as a “debt collector,” as defined by § 1692a(6), when it was collecting on debts owed by plaintiffs, we affirm the district court judgment dismissing the suit.


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