Til (Defaulted) Debt do us Part: The Need for Regulation of Debt Buyers Collecting on Delinquent Debt in the Aftermath of Henson v. Santander

• Author: Meghan Brickner
• Position: Juris Doctorate Candidate 2019, Capital University Law School; Ohio University, B.A. in Communication Studies
• Pages: 102-125

TIL (DEFAULTED) DEBT DO US PART: THE NEED FOR

REGULATION OF DEBT BUYERS COLLECTING ON

DELINQUENT DEBT IN THE AFTERMATH OF HENSON V.

SANTANDER

MEGHAN BRICKNER*

I. INTRODUCTION

In the recent U.S. Supreme Court decision in Henson v. Santander, the

Court found that diversified debt buyers are not bound by the Fair Debt

Collection Practices Act (“FDCPA”) when collecting on purchased

delinquent debt.

1

This decision effectively allows debt buyers to use

abusive and deceptive practices to collect debt, and it puts them at a

competitive advantage over third-party collection agencies which are

bound by the FDCPA. In light of this decision’s implications, there is a

great need for federal regulations to treat debt buyers the same way current

regulations treat third-party collection agencies in order to protect

consumers and level the debt collection playing field. The debt collection

regulations that are currently in place do not adequately reflect the changes

that have occurred within the industry over the past few decades, with

evolution of debt buying as a primary example.

2

The continued growth in

the debt collection industry and the ongoing issues posed by the abusive

communication tactics used to collect delinquent debt make regulation of

debt buyers that much more important.

3

This note will explore the debt buying industry, the implications of the

Santander decision, and the need for federal regulation of diversified debt

buyers participating in debt collection activities. Section II provides

important background information on the debt collection industry, the

industry participants, and the Fair Debt Collection Practices Act. Section

III analyzes the potential effects of the Santander decision on the debt

Copyright © 2019, Meghan L. Brickner.

* Juris Doctorate Candidate 2019, Capital University Law School; Ohio University,

B.A. i n Communication Studies. I would like to thank my mother, Margie Brickner, for

sparking my interest in this topic and for her unwavering support in this endeavor.

1

See 137 S. Ct. 1718, 1724 (2017).

2

U.S. GOV’T ACCOUNTABILITY OFF., GAO-09-748, Credit Cards: Fair Debt Collection

Practices Act Could Better Reflect Evolving Debt Collection Marketplace and Use of

Technology 7, 30 (2009), https://www.gao.gov/assets/300/295588.pdf [https://perma.cc/

A2KB-4A39].

3

See Lisa Stifler, Debt in the Courts: The Scourge of Abusive Debt Collection

Litigation and Possible Policy Solutions, 11 HARV. L. & POL’Y REV. 91, 91–93 (2017).

102 CAPITAL UNIVERSITY LAW REVIEW [47:101

buying industry, the inadequacies of other regulatory tools, and the need

for Congress to enact legislation regulating the conduct of debt buyers

collecting on delinquent debt.

II. BACKGROUND

A. Debt Buying and the Debt Collection Industry

The debt collection industry has seen tremendous growth over the past

several decades.

4

This growth is driven by the increase of available credit

to consumers, the development of the industry, and methods used to collect

debt.

5

The industry is projected to continue to expand over the next five

years.

6

According to a 2017 report on household debt, Americans owe

upwards of $3 trillion in non-housing debt, which includes credit cards,

auto loans, and student loans.

7

Of the trillions of dollars in debt owed by

Americans, “hundreds of billions of dollars of [it] is delinquent at any

given time.”

8

1. Consumer Credit / Debt Industry Participants

There are several types of entities within the consumer credit and debt

industry.

9

These entities include loan originators, loan servicers, third-

party collectors, and debt buyers.

10

Consumer debt is created by loan

originators, also commonly referred to as creditors.

11

Once the debt is

created, the loan originator can choose to outsource servicing of the loan—

while it is still in good standing—to loan servicers.

12

Once the debt has

become delinquent, the loan originator has the option to collect on the debt

themselves or outsource to third-party debt collectors.

13

4

Id. at 92–95.

5

Id. at 94.

6

CONSUMER FIN. PROTECTION BUREAU, CFPB Annual Report 2016: Fair Debt

Collection Practices Act 11 (2016), http://files.consumerfinance.gov/f/201603_cfpb-fair-

debt-collection-practices-act.pdf [https://perma.cc/V27K-ZSMH].

7

See Cen ter for Microeconomic Data, House hold Debt and Credit Report, FED. RES.

BANK OF N.Y. (Q4 2017), https://www.newyorkfed.org/microeconomics/hhdc.html

[https://perma.cc/KK4Q-2XLE].

8

Stifler, supra note 3, at 94.

9

See Brief for P etitioners at 6–8, Henson v. Santander Consumer USA, Inc., 137 S. Ct.

1718 (2017) (No. 16-349).

10

Id.

11

Id. at 6.

12

Id. at 6–8, 25.

13

Id. at 6–7.