From [HERE] and [HERE] The U.S. Supreme Court handed down a 9-0 ruling on Monday siding with Santander Consumer USA Holdings (SC) in a class action lawsuit over allegations it violated a law called the Fair Debt Collection Practices Act.
The court declined to expand the reach of federal legislation targeting abusive debt-collection practices such as harassment and threats, ruling it does not cover companies that buy debt, sometimes for pennies on the dollar, and then collect it.
The case was brought against the Banco Santander (SAN) subsidiary by four Maryland residents who defaulted on car loans.
The Supreme Court explained that the law applies only to companies that collect money on behalf of others, not businesses like Santander that collect debt bought from other companies after it fell into default.
Shares Santander Consumer USA Holdings were climbing higher during late-morning trading on Monday.
In just the last couple of years, Santander has been fined more than $1 billion for deceptive practices ranging from illegal overdrafts and overcharging black and Latino customers to illegally repossessing cars owned by members of the U.S. armed services who took out Santander loans and then were deployed overseas.
The case hinged in large part on the definition of “creditor” and “debt collector” and whether a company that buys debt should be treated as a creditor, not subject to the collections law. The law applies only to companies that collect debts on behalf of others—an $11.4 billion industry—and doesn’t apply to businesses like Santander who buy the distressed debt from other companies after it defaults, the Supreme Court ruled.
The plaintiffs argued that unscrupulous debt collectors could evade the law by buying the debt.
The ruling was the first written by the court’s newest justice, Donald Trump-appointee Neil Gorsuch, who said any change to the distinction would require a genesis in congress.
Four Maryland residents who had defaulted on car loans filed a proposed class action in 2012 in federal court, accusing Santander of violations of the debt-collection law including misrepresenting debt loads and bypassing debtors’ lawyers. Their debts had been sold to Santander, which then tried to collect on them. Boston-based Santander Holdings SAN, -1.76% is the majority owner of Dallas-based Santander Consumer USA, which specializes in car loans. Both entities a subsidiary of Spanish lender Banco Santander. [MORE]