It has proved to be something of a historic week for the Supreme Court of the United States, as Justice Neil Gorsuch, fresh off an acrimonious confirmation process, officially took his place on the bench for oral arguments. Indeed, with Gorsuch's ascension, the number of justices on the nation's high court, which has had a longstanding vacancy since the death of Antonin Scalia, has been restored to nine.
While this was the story that dominated much of the SCOTUS-related headlines over the last several days, the justices did hear oral arguments in some important and fascinating cases, including one examining what critics have called a glaring loophole in the Fair Debt Collection Practices Act.
The loophole in question revolves around the notion that while Congress did introduce stringent regulations for those firms that collect debts for others via the FDCPA, the landmark bill nevertheless fails to address the manner in which institutions like banks, car dealers and credit card companies regularly collect and handle debt.
Specifically, the FDCPA does not expressly address those scenarios in which third-party companies buy debts from these institutions and attempt to collect on their own.
The case, Henson v. Santander Consumer USA, revolves around car loans made by CitiFinancial, which were serviced by Santander, meaning it collected payments and pursued defaulting borrowers.
Santander eventually purchased these defaulting loans directly from CitiFinancial and attempted to collect. Soon after, however, the group was sued by several consumers for alleged violations of the FDCPA, including speaking with consumers it knew were represented by attorneys and making false statements.
In its response, Santander argued that it was not covered by the FDCPA given that it did not fall within the law's definition of a debt collector, meaning one who regularly collects debts "owed or due another."
The case ultimately made its way to SCOTUS, where the attorney of Santander reiterated this same position during oral arguments on Tuesday.
"The sole question presented by this case is whether an entity that purchases debts, and then attempts to collect them for its own account, qualifies as a debt collector under the [FDCPA]," he said. "The answer to that question ... is plainly no."
As for the affected debtors, their attorney argued that the law did indeed mean to include third-party debt buyers as debt collectors and that any decision otherwise would open the door for debt collectors to enter into unscrupulous arrangements with lenders.
"All they have to do is change their contract with their customer to arrange for a purchasing of the debt that they've been hired to collect and arrange to give back 60 percent of what they collect by virtue of that assignment, and they would evade regulation [under the FDCPA] as well."
While a decision is still months away, reports indicate that the justices, even those seemingly sympathetic to the debtors' arguments, were less than inclined to close this debt collection loophole.
Stay tuned for updates ...
If you have endured sustained harassment from debt collectors and would like to learn more about your rights and your options, consider speaking with a skilled legal professional who can provide answers and pursue solutions.