The Fair Debt Collection Practices Act (FDCPA) prohibits abusive, unfair, and deceptive debt collection practices, but it applies only to debt collectors. Earlier this week, the Supreme Court was asked to determine who qualifies as a “debt collector.” The court unanimously ruled that a bank or financial services company attempting to collect a debt that it owns—even if the debt was purchased from another lender—is not a “debt collector” subject to the requirements of the FDCPA.
The case arose from allegedly unfair debt collection practices by Santander, which had purchased the auto loan at issue from another lender. The parties agreed that the FDCPA applied to third party debt collectors but did not apply to banks collecting a loan that the bank originated. The question for the court, as phrased by Justice Gorsuch in his first opinion since joining the Supreme Court, was, “what if you purchase a debt and then try to collect it for yourself—does that make you a ‘debt collector’ too?” The court concluded that “a company collecting purchased defaulted debt for its own account—like Santander—would hardly seem to be barred from qualifying as a creditor under the statute’s plain terms.”
This decision makes clear that banks cannot be sued under the FDCPA for collecting their own loans, including loans purchased from other lenders. The court left open the question of whether a bank acting as a loan servicer for another lender qualifies as a “debt collector” under the FDCPA. But, in general, this decision should protect banks from FDCPA lawsuits.