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US Supreme Court Rules Debt Buyers Not Covered by the FDCPA

Supreme Court Further Protects Debt Buyers from FDCPA

debt buyers not covered by FDCPA

Unanimous Opinion: Debt Buyers May Abuse Consumers Freely

Yesterday, the US Supreme Court issued its second opinion this term regarding the applicability of the Fair Debt Collection Practices Act (FDCPA) to so-called “debt buyers.”

Debt Buyers are companies such as the notorious Midland Funding, LLC, which make a business of buying “bad debt,” often for pennies on the dollar, occasionally for nothing at all, and then collecting on the debt, through lawsuit and garnishment as needed. Debt buyers are frequent filers of “proof of claim” forms in Chapter 13 bankruptcy matters, which are the documents creditors must file with bankruptcy courts in order to be paid from Chapter 13 plan proceeds.

Mere weeks ago, the US Supreme Court issued a decision split roughly along party lines within the Court that held that debt buyers who file proof of claim forms seeking payment for debts outside states’ “statute of limitations” periods are not in violation of the FDCPA.

Debt Buyers Now Not Covered by the FDCPA At All

Now, in the case of Henson v. Santander Consumer USA, the Supreme Court has unanimously decided that the Fair Debt Collections Practices Act does not protect consumers from debt buyers in any way.

Why did they decide this? 

The decision, penned by wet-behind-the-ears Judge Gorsuch, rested the short ruling on the text of the FDCPA itself, which states that the statute allows consumers to file suits for damages against a person or entity who “regularly collects or attempts to collect . . . debts owed or due . . . another …”

The Court looked at a debt buyer’s (alleged) ownership of a debt in the present tense only. The petitioners argued that the the past-tense use of the word OWED means that Congress, in drafting the FDCPA statute, intended to include debts that were at any time prior to a collection attempt owed to another.

The Court rejected the argument that “past-tense” argument and looked at a debt as a matter of ownership interest as of the date of the improper collection attempt or claim of impropriety. If the entity doing the collecting itself “owns” the debt as of that point in time—good enough, says the Supreme Court. 

And screw you, consumers. 

And so much for the alleged “liberal” Justices Ginsburg, Sotomayor, and Kagan.

Debt Buyers under the FDCPA: End of the Discussion?

Not quite. The eternal question of whether a debt buyer really and properly under Michigan or other state law owns the debt remains open, in this writer’s opinion. The Supreme Court Justices made no mention whatsoever in their decision as to the common reality of debt buyers’ frequent inability to prove that they “own the note,” as it were. 

If the debt buyer cannot prove ownership, it is possible to argue that the entity in question is still prohibited from improper collections activity by the FDCPA.

If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.

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If you enjoyed reading “US Supreme Court Rules Debt Buyers Not Covered by the FDCPA,” please browse our other articles on our main Michigan Bankruptcy Blog.

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