Why SC Ruling Will Make Your Debt More Attractive
Expect “debt collectors” to have more interest in buying your delinquent loans as opposed to simply contracting for a percentage of collection recoveries if, as expected, the Supreme Court rules in favor of Santander Consumer USA, Inc.
Oral arguments were heard on the case yesterday, in an important collections case, and we can expect a ruling sometime in June. You can also expect states like New York to take a renewed interest in strengthening state level restriction on debt collection practices.
The FDCPA was passed by congress to deter abusive debt collection practices. It was intended to crack down on third-party collectors which is why it does not apply to banks and credit unions which are collecting on their own loans. The question is who exactly is a debt collector under 15 U.S.C.A. § 1692a (West). Under the statute, a debt collector is any person….”who regularly collects or attempts to collect, directly or indirectly debts owed or due or asserted to be owed or due another.” Santander purchased billions in car loans and set about collecting on those that were delinquent. Borrowers alleged that their aggressive collection practices violated the FDCPA, but when they tried to sue Santander for violations it successfully argued before the Court Of Appeals for the Fourth Circuit. Their argument was that since it was collecting on debt it owned, the statute didn’t apply to its activities.
According to press reports, justices weren’t buying the argument of the borrowers yesterday, who argued that Santander was taking advantage of a loop hole that is inconsistent with congress’s intent when it passed the FDCPA.
No matter how the Federal Law is interpreted, New York is one of several states that has a state level DCPA modeled after the federal law. In a brief submitted to the Supreme Court, New York joined several such states in arguing that existing state level prohibitions aren’t adequate. The brief noted for example, that New York’s debt collection statute (NY General Business Law § 600 et. seq.) has traditionally been interpreted in reference to the federal law and that it does not permit consumers to bring a lawsuit.
Stay tuned – this provides another classic example of how a change in direction in the federal level is often met with push back on the state level.