Ricky Henson v. Santander Consumer USA, Inc.
817 F.3d 131
| 4th Cir. | 2016Background
- Four Maryland consumers defaulted on auto loans originally made by CitiFinancial Auto; CitiFinancial repossessed and sold the vehicles and notified borrowers of deficiency balances.
- On December 1, 2011, CitiFinancial sold $3.55 billion of loan receivables (including these defaulted loans) to Santander, a consumer finance company that buys defaulted debt.
- Plaintiffs allege that after the purchase Santander and its agents contacted them and made misrepresentations while attempting to collect the deficiencies, violating the FDCPA.
- Plaintiffs sued under the FDCPA seeking to represent a class of consumers contacted by Santander on or after December 1, 2011.
- The district court granted Santander’s Rule 12(b)(6) motion to dismiss, holding the complaint did not allege Santander was a "debt collector" under 15 U.S.C. § 1692a(6).
- The Fourth Circuit affirmed, reasoning Santander became a creditor upon purchase and the complaint did not allege it collected on behalf of another when the challenged conduct occurred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Santander was a "debt collector" under the FDCPA when it engaged in the challenged collection conduct | Santander purchased defaulted loans, and under the FDCPA a purchaser of defaulted debts is a "debt collector" rather than a creditor | Santander became the creditor when it bought the defaulted loans and was collecting for its own account, so it is not a "debt collector" for those post-purchase collection acts | The court held Santander was not a "debt collector" under §1692a(6) for the alleged post-sale conduct; it was the creditor after purchase |
| Whether debt default status at time of acquisition determines "debt collector" status | Default at acquisition is dispositive: purchasers of defaulted debt are debt collectors | Default status is irrelevant to the threshold definition; focus is on whether the collector collects for others or for itself (or whether principal purpose is debt collection) | Court held default status does not determine debt-collector status; statutory definitions control and depend on who is owed the debt at time of collection |
| Whether FDCPA exclusions (e.g., creditor definition exclusion or §1692a(6)(F)(iii)) convert a purchaser of defaulted debt into a debt collector | The exclusions show Congress intended to treat purchasers of defaulted debt as debt collectors | Exclusions only carve out persons from definitions; they do not expand the definition to make purchasers of defaulted debt debt collectors when those purchasers collect for themselves | Court held plaintiffs misread exclusions; exclusions apply only after a person satisfies a statutory "debt collector" definition and do not make creditors into debt collectors |
| Whether a party’s prior role as a servicer/debt collector (pre-purchase) makes it a debt collector after purchasing the debts | Santander previously serviced/collected these loans and thus its post-purchase collection must still be governed by FDCPA as debt-collector conduct | A change in legal status occurred when Santander purchased the loans; post-purchase collections were for Santander’s own account (creditor conduct) | Court rejected plaintiffs’ continuity argument: role depends on status at time of the alleged wrongful conduct; post-purchase collection was creditor activity |
Key Cases Cited
- Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355 (6th Cir.) (discusses defaulted-debt purchaser status under FDCPA)
- FTC v. Check Investors, Inc., 502 F.3d 159 (3d Cir.) (analyzes definitions of debt collector and creditor)
- Heintz v. Jenkins, 514 U.S. 291 (1995) (construed §1692a(6): debt collector includes those who collect debts "owed . . . another")
- Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309 (11th Cir.) (statutory inquiry asks whether debts were owed to another at time of collection)
- Schlegel v. Wells Fargo Bank, N.A., 720 F.3d 1204 (9th Cir.) (rejects interpretation that "owed or due another" can mean "originally owed to another")
- Paroline v. United States, 134 S. Ct. 1710 (2014) (rules on statutory text construction principles cited for modifier scope)