Generally, the Fair Debt Collection Practices Act (FDCPA) regulates the conduct of debt collectors, but not creditors. But if the creditor is a debt buyer—a person or business who regularly buys debts and tries to collect on them—the FDCPA might or might not apply, depending on the circumstances.
In Henson et al. v. Santander Consumer USA Inc., the U.S. Supreme Court clarified under what circumstances a debt buyer is subject to the FDCPA. Based on the Court’s decision, as well as a subsequent Third Circuit decision, a debt buyer must comply with the FDCPA if it meets either the “regularly collects” or “principal purpose” definition of a debt collector.
Illegal Practices Under the FDCPA
The FDCPA sets out many acts that debt collectors can’t do when attempting to collect a debt from you. Among other things, debt collectors are not allowed to:
- call at inconvenient times
- call at inconvenient places
- call you if the collector knows you’re represented by an attorney
- talk to other people about your debt (in most cases)
- continue to call you after you tell them to stop, or
- threaten, harass, or mislead you.
Who's Considered a Debt Collector Under the FDCPA?
Under the FDCPA, a “debt collector” is any person:
- who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts (the “principal purpose” definition), or
- who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another (the “regularly collects” definition). (15 U.S.C. § 1692a).
Henson et al. v. Santander Consumer USA Inc. (The "Regularly Collects" Definition)
Whether a debt buyer falls into the FDCPA’s definition of “debt collector” has long been a matter of contention. The U.S. Supreme Court addressed this issue in 2017. In Henson et al. v. Santander Consumer USA Inc., 137 S.Ct. 1718 (2017), the U.S. Supreme Court looked at the “regularly collects” definition regarding a particular debt buyer. The Court then determined that the debt buyer was not considered a collector under the FDCPA and therefore did not have to comply with the requirements of the law.
In this case, Santander purchased a defaulted car loan and then attempted to collect on the debt. The petitioners claimed that Santander violated the FDCPA with its collection methods. In deciding the case, the Supreme Court straightforwardly interpreted the FDCPA and said that businesses like Santander—ones that purchase (and therefore own) the debt they’re trying to collect—aren’t attempting to collect “debts owed or due…another.” So, Santander did not have to comply with the FDCPA.
The Bottom Line
While this decision clarified the "regularly collects" definition under the FDCPA as it applies to debt buyers, the decision did not address whether a debt buyer would fall under the definition of a debt collector if their “principal purpose...is the collection of any debts.” In the Henson case, Santander successfully argued that its principal purpose was loan origination—not buying and collecting defaulted debts. So, the Supreme Court did not examine the "principal purpose" definition. However, the United States Court of Appeals for the Third Circuit subsequently reviewed the issue.
Tepper v. Amos Financial, LLC (The "Principal Purpose" Definition)
After the Supreme Court decided the Henson case, the United States Court of Appeals for the Third Circuit decided in Tepper v. Amos Financial, LLC, 898 F.3d 364 (3d Cir. 2018), that debt buyers qualify as debt collectors under the FDCPA if their "principal purpose" is collecting debts.
In this case, the plaintiffs (James and Allison Tepper) filed a suit alleging that the defendant (Amos) violated the FDCPA through its written and oral communications when trying to collect a defaulted mortgage loan. Amos argued that, because it owned the debt it was trying to collect, it did not have to comply with the FDCPA. However, the Third Circuit looked at whether Amos met the “principal purpose” definition under the FDCPA.
Amos admitted that its sole business was collecting debts it had purchased, and it clearly used both mail and telephone calls in its collection efforts. The Third Circuit said that the plain language of the FDCPA is clear: A company that satisfies the "principal purpose" definition is, indeed, a debt collector. So, the Court determined Amos was a debt collector as defined by the FDCPA, and it had violated the law in its collections activities.
The Bottom Line
Ultimately, the Third Circuit decided that a business whose principal purpose is collecting debts is considered a debt collector for purposes of the FDCPA and it must comply with the law’s requirements—even if the company owns the debt that it’s trying to collect.
The Third Circuit was the first appellate court to issue a precedential decision addressing the applicability of the Supreme Court's holding in Henson to the "principal purpose" definition of a debt collector under the FDCPA.
Talk to an Attorney
If you’re receiving harassing calls from a debt collector and you want to find out if the collector is violating the FDCPA or another consumer protection law, consider talking to an attorney to find out about different options in your particular circumstances.