How the Supreme Court Decision on Debt Collection Practices Affects You

Plenty of people know that sinking feeling.

You’re relaxing one evening after dinner, and an unknown or blocked number flashes across the phone display. That knot begins to grow in the pit of your stomach because you know it could be another debt collector calling.

For those of us in debt — living the true American Dream — the Fair Debt Collection Practices Act (FDCPA) establishes guidelines for companies that have been hired to collect money from you.

(Of course, you could always find ways to earn money online, pay off your debt and get that monkey off your back.)

What Are Your Rights When It Comes to Debt Collection Companies?

• They can’t make harassing phone calls at odd hours, say before 8 a.m. or after 9 p.m.
• They can’t publicly identify you as a debtor, though they can call other people to get your digits.
• They can’t call repeatedly or use profanity. (That doesn’t mean you can’t!)
• They can’t pretend to be from the government or law enforcement agencies.
• And, they have to give you the full information on the debt, among other rules and regulations.

So what about the companies that actually own your debt?

On Monday, the U.S. Supreme Court ruled unanimously against expanding the FDCPA to cover banks or other financial institutions that buy your debt and scores of other people’s debt with the intention of collecting on it themselves.

At the heart of the ruling is a five-year-old class action lawsuit filed against Santander Consumer USA Holdings, Inc. A group of Maryland residents claimed that when the Dallas-based firm bought their defaulted car loan debt from CitiFinancial Auto, a subsidiary of Citi, it should have been bound by standards under the Fair Debt Collections Act (FDCA). The Supreme Court disagreed.

But don’t fret! Consumer advocates may be upset with the decision, but the move just maintains the status quo. You have the same rights under the FDCPA if you’ve got a third-party collection company bothering you.

And according to Braden Perry, a regulatory and government investigations attorney with Kansas City-based Kennyhertz Perry, the Consumer Finance Protection Bureau still prohibits unfair, deceptive or abusive acts and practices.

“In my practice, whether my client is a (first)-party or (third)-party collector, I always counsel the same: Follow FDCPA and its guidance,” Perry says. “It was enacted for a reason and the simple fact that you are not subject to it doesn’t mean you shouldn’t follow it.”

What the Supreme Court Says About Debt Collection

The June 12 opinion was freshly-minted Supreme Court Justice Neil Gorsuch’s first since his appointment by President Donald Trump. In it, he directly addressed the definition of a “debt collector.”

“Everyone agrees that the term embraces the repo man — someone hired by a creditor to collect an outstanding debt,” Gorsuch wrote. “But what if you purchase a debt and then try to collect it for yourself — does that make you a ‘debt collector’ too?”

In this case, Santander represented, at one time or another, both scenarios cited by Gorsuch. The firm was originally hired by Citi to collect the car loan debt, and under that circumstance would be held to FDCPA standards.

But Santander subsequently purchased the debt and became the owner of the defaulted loans. The FDCA only covers third-party debt collection companies, but since Santander actually bought the debt, it was now itself a creditor and therefore not covered under the law, according to the ruling.

Still, the U.S. Congress could one day alter the rules to cover companies like Santander, with Gorsuch noting it wasn’t the role of the judiciary to do so in its ruling.

“We have no difficulty imagining, for example, a statute that applies the Act’s demands to anyone collecting any debts, anyone collecting debts originated by another, or to some other class of persons still,” Gorsuch wrote. “Neither do we doubt that the evolution of the debt collection business might invite reasonable disagreements on whether Congress should reenter the field and alter the judgments it made.”

Alex Mahadevan is a data journalist at the Penny Hoarder. He’s not proud to admit he’s dodged calls from collection agencies in the past.