Henson v. Santander Consumer USA Inc.

Ricky Henson and other consumers defaulted on auto loans that Santander Consumer USA Inc. later purchased and attempted to collect. They filed a class action alleging that Santander engaged in abusive debt collection practices in violation of the Fair Debt Collection Practices Act (FDCPA). The FDCPA generally defines a “debt collector” as one who regularly collects debts owed or due another. Santander argued it was not a debt collector because it was collecting its own purchased debts. The district court agreed, but the U.S. Court of Appeals for the Fourth Circuit reversed, holding that Santander could qualify as a debt collector. The U.S. Supreme Court granted certiorari and, on June 12, 2017, issued a unanimous opinion authored by Justice Neil Gorsuch. The Court focused on the plain statutory text and concluded that an entity collecting debts it owns for its own account does not collect debts “owed or due another,” and therefore falls outside the FDCPA’s definition of a debt collector.

The Supreme Court unanimously held that Santander Consumer USA Inc. is not a “debt collector” under the FDCPA because it collects debts it owns, not debts owed to another entity. The Fourth Circuit’s judgment was reversed.

Whether a company that purchases defaulted debts and then collects them for its own account qualifies as a “debt collector” under the Fair Debt Collection Practices Act.

The decision significantly limited the reach of the FDCPA, effectively shielding debt buyers and originating creditors who collect their own debts from the statute’s strict liability provisions. Consumer advocates warned that it created a loophole allowing aggressive collection tactics on purchased debts, while the financial services industry viewed it as a necessary clarification that preserved the distinction between first-party collections and third-party debt collectors. The ruling prompted calls for legislative amendments to extend FDCPA protections.