Justices Agree to Hear Debt-Collection Case

WASHINGTON (CN) – The Supreme Court will decide whether Santander Bank’s collections group can be sued by a class of plaintiffs who claim the company skirted the law while collecting on their delinquent car notes.

The country’s highest court granted the would-be class members’ petition for a writ of certiorari on Friday.

Their order set the stage for a potentially precedent-setting review of a Fourth Circuit ruling that the collections activities of Santander Consumer USA were not governed by the federal Fair Debt Collections Practices Act.

At issue in is the question of whether Santander qualifies as a “debt collector,” which would make them subject to the terms of the FCDPA, or a “creditor,” which would render them immune from the act’s constraints.

Santander was sued in November 2012 by four Maryland residents seeking to represent a class of consumers who were subject to collections activity by the company after having their cars repossessed and sold for non-payment of loans.

According to court documents, CitiFinancial Auto sold the balances owed on the plaintiffs’ car notes for pennies on the dollar to Santander, which then allegedly began to engage in some aggressive collection practices.

The company allegedly misrepresented the amounts it was collecting and communicated directly with consumers it “knew to be represented” by attorneys.

In their lawsuit, lead plaintiffs Ricky Henson, Ian Glover, Karen Pacouloute and Paulette House claim these activities violated the FDCPA.

The lower court granted Santander’s motion to dismiss the suit. Its decision stated that Santander owned the debts and was collecting them on its own behalf, therefore making it a creditor rather than a debt collector and freeing it from the boundaries of the FDCPA.

The plaintiffs appealed, contending that the roles of debt collectors and creditors were mutually exclusive under the terms of the Act.

Much of their argument hinged upon an exclusion in the FDCPA’s definition of a debt collector based on whether or not the alleged debts were in default when the collections activity took place.

But the Fourth Circuit dismissed this logic as irrelevant, stating that in order to lean on an exclusion in a clause governing debt collectors, the plaintiffs must first prove that Santander was actually a debt collector, which they did not do.

“Because the complaint does not satisfy any definition of debt collector, the analysis ends, and the exclusion from the definition of debt collector, on which the plaintiffs rely, has no significance,” U.S. Circuit Judge Paul Niemeyer wrote in the March 2016 decision.

When the plaintiffs’ motion for a rehearing was denied, they petitioned the Supreme Court for a writ of certiorari.

The justices said they decided to take up the case because “The courts of appeals are deeply and avowedly divided over whether.purchasers of defaulted debt are covered by the FDCPA. This case presents the Court an opportunity to resolve that important conflict.”


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