Years ago, in the 1970s, our federal government codified the Fair Debt Collection Practices Act (FDCPA). The idea was to help consumers who had outstanding bills avoid harassing or bullying tactics from collection agencies trying to obtain payment.
Where before, virtually no rules were in place for debt collection shenanigans, now there would be parameters—and punishment—for collection agencies that went too far. Calling someone at work was taboo, calling early in the morning or late at night was verboten, threatening legal action they had no intention of taking was forbidden.
For decades, consumers enjoyed these rights. But in June of this year, the Supreme Court of the United States (SCOTUS) made a decision that may have harrowing effects on these protections. Citing a case where collection measures had apparently strayed outside the law, the judges returned an opinion that was shocking and that created a setback to the security consumers enjoyed.
What was the case?
The case involved four individuals who had defaulted on their car loans. The company involved was Santander Consumer USA Holdings, Inc., a consumer finance company based in Dallas. Santander was accused of “misrepresenting debt loads and bypassing debtor’s lawyers” according to Reuters News Service.
Why was the case dismissed? It wasn’t that the Supreme Court didn’t agree with consumer rights—it was that they were reading the law in a very literal sense. Santander, it turns out, was indeed not a collection agency. Instead, Santander was the owner of the debt.
How can this be, you ask—the original accounts were with the car loan companies? While initially the loans were referred to a collection agency, the debts were later sold to Santander, effectively making them the new debt owner. The FDCPA does not apply to debt owners, i.e. if Sears calls you directly to collect payment you owe them, they have almost no parameters within which they must operate. By purchasing the debt, Santander also was no longer bound by the FDCPA.
What does this mean?
How does this affect consumers? It means that, should you end up with a debt on which you have defaulted, you must be ever vigilant of who is contacting you and what your rights are.
One important thing to remember is that if your debts have become unmanageable, there is always the option of a clean slate and new beginning by filing for bankruptcy. Once bankruptcy is filed, neither a debt owner nor a collection agency may contact you directly.