Consumer Crossroads: Where Financial Services and Litigation Intersect

On February 22, 2019, the Third Circuit in Barbato v. Greystone Alliance, LLC, issued a decision that expands the scope of the Fair Debt Collection Practices Act's (FDCPA) definition of the term "debt collector" to any entity that acquires debt for the purpose of collection, but outsources the actual debt collection activity.

On June 1, 2017, just two weeks before the U.S. Supreme Court's unanimous decision in Henson v. Santander Consumer USA, Inc., Colorado Governor John Hickenlooper signed the revised Colorado Fair Debt Collection Practices Act to specifically include debt buyers in the statute's definition of debt collectors. Colorado is now one of a small number of states that specifically include debt buyers under the law (including New York, California, and Washington). However, other states may follow suit. For instance, Oregon and Maine both have introduced bills to extend the definition of debt collector to include debt buyers. Considering that nearly two dozen state Attorneys General submitted amicus briefs to the Supreme Court in Santander in favor of including debt buyers in the definition of debt collector under the FDCPA, it is possible that more states may follow the lead of Colorado. Ultimately, the various legislatures will decide whether debt buyers should fall within the scope of the state-enacted versions of the FDCPA; but, debt buyers should note, it is likely that Colorado will not be the last state to enact such legislation. Just as Justice Gorsuch noted in his Opinion that these are matters for the legislature and not the Supreme Court to resolve, it appears that at least some states may just take Justice Gorsuch up on his offer and include debt buyers in the scope of their regulatory framework. Ironically, Justice Gorsuch’s home state of Colorado leads the way.

Just two months after hearing argument in Henson v. Santander Consumer USA, Inc., the Supreme Court declined the opportunity to expand the Fair Debt Collection Practices Act ("FDCPA") to debt buyers. In an earlier blog post, we noted the potential impact this case may have on the regulation (and marketplace as a whole) of companies that seek to collect defaulted accounts purchased from originating lenders. In his first opinion as a member of the Supreme Court, Justice Neil Gorsuch penned an 11-page decision, affirming the Fourth Circuit's finding that Santander Consumer USA, Inc. ("Santander") did not constitute a "debt collector" under the relevant portion of the FDCPA's definition.