SCOTUS rules that the FDCPA does not apply to purchased debt

Florida residents who are struggling to cope financially may be familiar with some of the less ethical practices of debt collectors. The Fair Debt Collection Practices Act was passed in 1977 to regulate this nebulous part of the financial sector, but much has changed during the last four decades. The practice of buying tranches of unpaid debts for pennies on the dollar was almost unheard of in the late 1970s, but this form of debt collection now makes up about a third of the revenue generated by the $11.4 billion industry.

The FDCPA prevents debt collectors from using deceptive or abusive tactics, but the provisions of the 1977 law only apply to companies that seek to collect debts on behalf of others. However, this did not prevent a group of four Maryland consumers from filing a class action lawsuit against a debt collection company that had purchased their delinquent car loans. The consumers claimed that the debt collection company had violated the terms of the FDCPA, but the case was dismissed because their debts had been sold.

In a unanimous ruling on June 12, the U.S. Supreme Court upheld the lower court’s decision to dismiss the case. Justice Neil Gorsuch wrote in his first Supreme Court ruling that it was the responsibility of Congress and not the courts to settle the issue of ambiguous debt collection regulations. Consumer advocacy groups fear that the decision will embolden debt collectors to devise creative ways to circumvent the law.

Attorneys with debt relief experience will likely have encountered individuals who have dealt with harassment and abuse from debt collection companies over bills that they are simply unable to pay. Relentless phone calls and letters can add a layer of stress and anxiety to an already difficult situation, but lawyers could explain how filing a Chapter 7 or Chapter 13 bankruptcy puts at least a temporary halt to debt collection efforts and offers the chance of a fresh financial start.