Does the Fair Debt Collection Practices Act apply to Debt Buyers?
Over the past few years, millions of people across our country have been sued by companies like Midland Funding, LVNV Funding and Santander Consumer USA. These companies purchase debts from original creditors like credit card companies.
Debt buyers become debt collectors when attempting to collect on the debt they have purchased.
Debt collectors are governed by a federal law called the Fair Debt Collection Practices Act. The Act prohibits debt collectors from using abusive, unfair or deceptive practices to collect debts. Violators incur heavy fines.
Those of you that have experienced the practices of a debt collector may have felt that they acted in violation of the Act by the way that they talk to you, or by the language use in their letters.
I bet you felt that their tactics were abusive, unfair or deceptive.
The Act applies to those who are regularly engaged in the business of collecting debt as an agent of original creditors.
So the question comes down to this – when a company BUYS debt from original creditors, does that debt buyer company have to follow the same rules as every other debt collector?
You would think so, and many lower courts agreed. So, eventually, the question went all the way up to the US Supreme Court to decide this question once and for all.
Some people that were getting abused and deceived by debt collectors started filing tons of lawsuits against debt buyer collectors claiming that they violated the Act.
The US Supreme Court looked at the different methods used by debt buyer collectors when they contacted people.
Debt buyer collectors said things like, if you work out a payment arrangement with us, then you won’t incur additional charges.
Most people would think that meant that interest was going to accrue on the debt until it was paid.
The problem was that many of these debt collectors didn’t have the authority to add additional charges since the original creditor closed the account. They just bought the debt, not the original terms of the contract. Do you think that practice is deceptive?
Then, these debt buyer collectors started telling people that if their file is sent to collection lawyers, any savings on additional charges were going to be withdrawn and no longer available to them. That wasn’t fair either for the same reason.
So, it all came down to the words used in the Act to define who is a debt collector.
These are the words used to define debt collectors in the Act:
Entities that collected “Debts Owed”, or “Debts Due”, or “Debts Due Another” was part of the definition of what a debt collector was collecting.
Isn’t that how you would understand the debt buyer’s role after they purchased a debt owed, or debt due or debt due another and tried to collect it from you?
Most people after reading a letter telling them about a debt owed would think, hey, debt buyer, you’re really a debt collector because you’re collecting debt on a debt that is due, or a debt that was due to someone else, or a debt that’s owed.
You’re collecting debt!
That’s the definition of a debt collector, and therefore they’re subject to the Act and their violations are punishable by law.
Well, the Supreme Court didn’t want to interfere with the government body that wrote the law – Congress. They looked at how the Act was written, applied it to certain scenarios, but refrained from amending the language in the Act.
Amending the language to clarify was the duty of Congress, they said. If there is confusion in the wording, then it’s up to Congress to correct it, or make it clear to everyone affected by it.
The Supreme Court unanimously declared that a company that buys debt can collect on that debt without being subject to violations of the Fair Debt Collection Practices Act.
That’s because the Act doesn’t apply to those who are collecting debt that they own. And it doesn’t matter what tactics they use. The rules don’t apply to them.
