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High Court Narrows Reach of FDCPA to Some Consumer Finance Firms

Fri 16 Jun, 2017  /  by McIntyre & Lemon  /   Client Alerts

06/16/17 – Law360 reports that the U.S. Supreme Court on Monday ruled that a federal debt collection law does not extend to banks and other consumer finance firms that buy and service defaulted debt.

According to Law360, the unanimous decision from the high court upheld a March 2016 Fourth Circuit ruling in favor of a consumer lending company in finding that the Fair Debt Collection Practices Act only applies to more traditional debt collection firms and not to consumer finance firms that purchase debt and collect on it.

The central fight between the plaintiffs and the defendant is that many consumer finance firms do not consider themselves to primarily be debt collectors even when they service defaulted debt they purchase. The issue in the case was to determine if the FDCPA extends to such firms.

The Supreme Court held that companies will not be subject to the FDCPA simply because they purchase defaulted debt and attempt to service those debt. Because the companies own the debt they are servicing, the FDCPA does not apply to them.

The case is Henson et al. v. Santander Consumer USA Inc., case number 16-349, in the Supreme Court of the United States.