Yesterday, Receivables Management Association International (RMA) issued a statement urging its membership and the broader receivables management industry to proceed with caution when interpreting the United States Supreme Court ruling in the case of Henson v. Santander.
In this unanimous decision, the Court determined that Santander Consumer USA, Inc. did not fall under the plain meaning of the term “debt collector” in the federal Fair Debt Collection Practices Act (FDCPA) when it purchased defaulted loans originated by another lender and proceeded to collect on these loans because it was not seeking to collect the debts “owed another”. The act of purchasing the loans meant that the debt was owed to Santander—not another entity.
However, the Court left open the question of the applicability of the alternative FDCPA definition of “debt collector” which states that it also applies to “any business the principal purpose of which is the collection of any debts” (emphasis added). This unanswered question by the Supreme Court raises questions for debt buying companies who purchase and actively collect on their own debt. While these companies would not be collecting debt owed another, they are still engaged in collecting debt.
While all judicial decisions are based on the facts contained in the case, it is conceivable that the Santander decision may be used by debt buying companies that operate solely as an investment vehicle and do not engage in any debt collection activity themselves (aside from acquisition) to argue they are not subject to FDCPA regulation. However, RMA would urge all companies that operate under either the active or passive business model to consult with legal counsel before making any operational changes.
In the end, RMA does not see the Santander decision as lessening the consumer protections required of its membership due to the rigorous requirements of RMA’s Receivables Management Certification Program (RMCP). RMA estimates that over 80 percent of consumer receivables in the United States that have been sold on the secondary market are owned by companies who are RMCP certified and thereby bound by standards that already go above and beyond the requirements of the FDCPA.