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Decided: March 23, 2016

The Fourth Circuit affirmed the district court’s dismissal.

Four Maryland consumers, Ricky Henson, Ian Glover, Karen Pacouloute, and Paulette House, each entered into a retail installment sales contract with CitiFinancial Auto Credit, Inc. or one of its affiliates to finance an automobile purchase, and all four subsequently defaulted. On December 1, 2011, Santander Consumer USA, Inc., (“Santander”) purchased $3.55 billion in loan receivables, including the plaintiff’s defaulted loans, from Citifinancial Autos Credit, Inc., and thereafter began to try to collect on those debts. In November 2012, the four consumers brought action againsts Santander, alledging that Santander attempted to collect the debts in a manner which violated the Fair Debt Collection Practices Act (“FDCPA”). When the district court dismissed the claims against Santander on the ground that the complaint failed to demonstrate that Santander engaged in the alleged collection practices as a “debt collector,” as required to bring an FDCPA claim, the four plaintiffs appealed.

In their appeal, the plaintiffs argue that the default status of the debt is determinative of whether a debt purchaser is a “debt collector” or a “creditor.” Their argument is based on language found in the exclusion to the definition of “creditor” in § 1692a(4) of Title 15 of the United States Code, as well as language used in the exclusions to the definition of “debt collector” found in the § 1692a(6)(F), which both specifically reference whether or not the debt is in default when it is transferred. The Court, however, found this interpretation to be logically flawed and contrary to the plain text of the statute. According to the Court, the plaintiffs’ first error is in looking to the exclusions without first considering the statutory definitions in the main text. Instead, the structure of § 1692a(6) clearly indicates that any assessment as to whether a person is a “debt collector” must first determine whether that person satisfies the definitions in the main text before considering the exclusions found in subsequent subsections, and if that person does not fall under one of those definitions, the exclusions need not be considered at all. It follows then, that the material distinction is whether Santander is a “creditor” or a “debt collector” the collection of the debt is for itself or on the behalf of others, respectively.

Applying this interpretation to the alleged facts, the Court found that the plaintiffs’ complaint failed to show that Santander satisfied any of the three statutory definitions of a “debt collector,” because it instead showed that: Santander’s principal business was as a consumer finance company, not to collect debt; Santander was not using a name other than its own to collect debt; and Santander was collecting debt owed to it because it became the entity to which the debt was owed when it purchased the plaintiff’s debts. Thus, according to the Court, the analysis should end there, regardless of the default status of the debts. Consequently, because the plaintiffs failed to demonstrate that Santander was a debt collector as defined in § 1692(a) at the time it was collecting on the plaintiffs’ debts, the Court affirmed the district court’s dismissal of the claims.

Full Opinion

Charlotte Harrell