Are Debt Buyers Regulated As Debt Collectors Under the FDCPA? U.S. Supreme Court to Decide

The U.S. Supreme Court on Friday agreed to decide whether firms which buy debt for pennies on the dollar can be held liable in Fair Debt Collection Practices Act lawsuits brought by the debtors they target. The Court agreed to review a lower court's decision to dismiss a consumer class action lawsuit against Santander Consumer USA Holdings Inc (SC.N) over allegations it violated the Fair Debt Collection Practices Act. Debt buyers are a fast-growing segment of the multibillion-dollar debt collection industry. This case could have a major impact on these firms. The decision hinges on the definition of "creditor" and "debt collector" since in general creditors are not subject to the FDCPA.

Four Maryland residents who defaulted on car loans filed a proposed class action lawsuit against Santander in 2012 in federal court alleging violations of the debt collection law, such as misrepresenting debt loads and bypassing debtors' lawyers.  The debts had been sold to Santander, a vehicle-financing and lending company owned in part by a subsidiary of Banco Santander (SAN.MC), the euro zone's second-largest bank by market value.  The 4th U.S. Circuit Court of Appeals in Richmond, Virginia dismissed the lawsuit last March after determining the law applied only to debt collectors, and Santander was a creditor since it purchased the loans.