WASHINGTON–The U.S. Supreme Court voted unanimously to decline to widen the reach of a federal law that targets abusive debt-collection tactics, including harassment and threats, saying it does not cover companies that buy debt and then attempt to collect on it.
The Supreme Court ruling held up a lower court’s dismissal of a proposed consumer class action lawsuit against Santander Consumer USA Holdings over allegations it violated a law called the Fair Debt Collection Practices Act.
The ruling, which was the first authored by the court's newest justice, Neil Gorsuch, found that any changes to the law should come from the U.S. Congress, not the court. The court said it found the law applies only to companies that collect money on behalf of others, not businesses such as Dallas-based Santander that collect debt bought from other companies after it fell into default.
Santander primarily specializes in car loans and is owned in part by a subsidiary of Banco Santander, the euro zone's second-largest bank by market value.
Four Maryland residents who had defaulted on car loans filed a proposed class action in 2012 in federal court, accusing Santander of violations of the debt collection law including misrepresenting debt loads and bypassing debtors' lawyers.
Their debts had been sold to Santander, which then tried to collect on them.
The case hinged partly on the definition of "creditor" and "debt collector" and whether a company that buys debt should be treated as a creditor and therefore not subject to the law. The plaintiffs said that unscrupulous debt collectors could evade the law merely by buying the debt.
Gorsuch said the law does not distinguish between original lenders and debt buyers.
"So a company collecting purchased default debt for its own account - like Santander - would hardly seem to be barred from qualifying as a creditor under the statute's plain terms," Gorsuch wrote, adding that only Congress has the power to change that if lawmakers want to do so.