Okay for debt collector to execute on debtor's FDCPA claim against it as a debtor asset, then dismiss it? - 9th Circuit says No (Arellano v Clark Cty. Collection Serv.)

COLLECTOR'S "BOLD GAMBIT" TO THWART FDCPA CLAIM 

THWARTED ON APPEAL 

Debt collectors cannot evade the restrictions of the [FDCPA] by forcing a debtor’s claims to be auctioned, acquiring the claims, and dismissing them. To allow otherwise would thwart enforcement of the FDCPA and undermine its purpose. Arellano v Clark County Collection Service, LLC, Borg Law Group, LLC, No.16-15467 (9th Cir. Nov. 17, 2017) (federal law preempts a private party’s use of state execution procedures to acquire and destroy a debtor’s FDCPA claims against it). 

ARELLANO V. CLARK CTY. COLLECTION SERV.

OPINION

THOMAS, Chief Judge:

Can a debt collector avoid liability under the Federal Fair Debt Collection Practices Act by obtaining the debtor’s lawsuit through a writ of execution? We conclude that such a procedure frustrates the Act’s purpose and is thus preempted.

I

Patricia Arellano was overdue on a small amount of medical debt—$371.89 to be precise. A private collection agency, Clark County Collection Services, sent her a letter about it. Included with the letter was a summons and state justice court complaint seeking collection of the debt. The complaint itself stated that Arellano could “[d]ispute the validity of this debt” within 30 days, but that failing to do so would result in a presumption of validity. However, separately, in small print, the summons indicated that to defend the lawsuit, Arellano must file a formal written response with the court within 20 days.

Arellano did not file a response, and the collection agency obtained a default judgment against her in justice court for $793.39. The debt had doubled in the intervening month because it now included costs, pre-judgment interest, and attorney fees.

Subsequently, Arellano filed suit against the collection agency and its law firm under the Fair Debt Collection Practices Act (“FDCPA” or “the Act”), 15 U.S.C. § 1692 et seq. She claimed that they had engaged in misleading practices under 15 U.S.C. § 1692e(1) by stating that the debtor could dispute the debt within 30 days of receipt, when the actual summons required the filing of an answer in court within 20 days. She further alleged that Clark County Collection Services’ name impermissibly implied affiliation with the Clark County government, violating 15 U.S.C. § 1692e(1).

The collection agency countered with a bold gambit.

Armed with its default judgment, it requested the justice court to issue a writ of execution against Arellano in the amount of $826.72, an increased amount reflecting additional costs. Like most states, Nevada allows courts to authorize a sheriff to levy on the property of a judgment debtor to satisfy a judgment. Butwinick v. Hepner, 291 P.3d 119, 121 (Nev. 2012). With some exceptions not relevant here, the property subject to a writ of execution in Nevada includes a “right to bring an action to recover a debt, money, or thing.” Gallegos v. Malco Enters. of Nev., 255 P.3d 1287, 1289 (Nev. 2011) (quoting Black’s Law Dictionary 1617, 275 (9th ed. 2009)). Thus, the collection agency’s strategy in seeking the writ was not to obtain personal property to satisfy the judgment, but to acquire the rights to Arelleno’s FDCPA lawsuit against the agency so it could have it dismissed.

The justice court granted the writ, which directed the Clark County Sheriff “to satisfy this judgment with interest and costs as provided by law, out of the personal property of the judgment debtor.” The writ described the targeted property as all “claims for relief, causes of action, things in action, and choses in action in any lawsuit pending in Nevada including, the rights of Patricia Arellano, in the civil action” pending against the collection agency and its lawyers.

Thereafter, pursuant to the writ of execution, the sheriff sold Arellano’s lawsuit in an auction sale on the Clark County courthouse steps. Clark County Collection Services bought the claims against itself for $250.

After buying Arellano’s lawsuit, the collection agency moved in federal district court to dismiss the lawsuit, arguing that Arellano “no longer possesse[d] any rights of action in this case, and no longer possesse[d] any standing to sue.”

The district court dismissed Arellano’s cause of action.

II

State law can be preempted in three circumstances pursuant to the Supremacy Clause, U.S. Const., Art. VI, cl. 2. English v. Gen. Elec. Co., 496 U.S. 723, 78 (1990). Only the third circumstance is relevant here: “state law is pre-empted to the extent that it actually conflicts with federal law.” Id. At 79. This conflict occurs when “the operation of state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,’” In re Cybernetic Servs., Inc., 252 F.3d 1039, 1045–46 (9th Cir. 2001) (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 479 (1974)), or when it “interferes with the methods by which the federal statute was designed to reach [its] goal,” Int’l Paper Co. v. Ouellette, 497 U.S. 481, 494 (1987). In other words, state law is preempted when “under the circumstances of the particular case,” it stands as an obstacle to Congressional purpose “—whether that ‘obstacle’ goes by the name of ‘conflicting; contrary to; repugnance; difference; irreconcilability; inconsistency; violation; curtailment; interference,’ or the like.” Geier v. Am. Honda Motor Co., 529 U.S. 861, 873 (2000) (alterations omitted) (quoting Hinesv. Davidowitz, 312 U.S. 52, 67 (1941)).

Federalism requires that we assume federal law was not intended to supersede the states’ historic police powers “unless that was the clear and manifest purpose of Congress.” CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2188 (2014).

Although we read even express preemption provisions narrowly, a state cannot avoid compliance with a federal regime “merely by relying upon a connection to an area of traditional state  regulation.” Wos v. E.M.A., 568 U.S. 627, 1400 (2013).1

A

“[T]he purpose of Congress is the ultimate touchstone in every pre-emption case.” Altria Grp., Inc. v. Good, 555 U.S. 70, 76 (2008) (citing Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996)). “The FDCPA was enacted as a broad remedial statute designed to ‘eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.’” Gonzales v. Arrow Fin. Servs., LLC,660 F.3d 1055, 1060 (9th Cir. 2011) (quoting 15 U.S.C. § 1692(e)). The Act’s purpose is “to protect vulnerable and unsophisticated debtors from abuse, harassment, and deceptive debt collection practices.” Guerrero v. RJM Acquisitions, LLC, 499 F.3d 926, 938 (9th Cir. 2007) (citing S. Rep. 95–389, at 2, 4 (1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1696, 1699). And the “FDCPA protects all consumers, the gullible as well as the shrewd . . . the ignorant, the unthinking and the credulous.” Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1171 (9^th Cir. 2006) (quoting Clomon v. Jackson, 988 F.2d 1314, 1318–19 (2d Cir. 1993)).

In order to achieve these goals, the Act regulates communication between debt collectors and debtors, 15 U.S.C. §§ 1692b, c, g, and creates a federal cause of action for debtors under 15 U.S.C. § 1692k. Debt collectors may be subject to civil liability for engaging in harassment or abuse, 15 U.S.C. § 1692d, making false or misleading representations of various sorts, 15 U.S.C. §§ 1692e, j, or engaging in unfair practices while attempting to collect debt, 15 U.S.C. § 1692f.

The FDCPA also includes an express preemption and savings clause:

This subchapter does not annul, alter, or

affect, or exempt any person subject to the

provisions of this subchapter from complying

with the laws of any State with respect to debt

collection practices, except to the extent that

those laws are inconsistent with any provision

of this subchapter, and then only to the extent

of the inconsistency. For purposes of this

section, a State law is not inconsistent with

this subchapter if the protection such law

affords any consumer is greater than the

protection provided by this subchapter.

15 U.S.C. § 1692n.

To enforce the FDCPA, Congress chose “a private attorney general approach.” Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008) (citing Tolentino v. Friedman, 46 F.3d 645, 651 (7th Cir. 1995)); see also Graziano v. Harrison, 950 F.2d 107, 113 (3d Cir. 1991) (noting that it was “Congress’s intent that the Act should be enforced by debtors acting as private attorneys general.”). “Prevailing plaintiffs . . . are entitled to actual damages, statutory damages, and attorney’s fees and costs.” Gonzales, 660 F.3d at 1061 (citing 15 U.S.C. § 1692k(a)).

B

The collection agency argues that because the FDCPA does not speak directly to the execution of claims, there can be no federal preemption. This argument denies the existence of conflict preemption. “And conflict preemption . . . turns on the identification of ‘actual conflict,’ and not on an express statement of pre-emptive intent.” Geier, 529 U.S. at 884. Indeed, “the Court has never before required a specific, formal agency statement identifying conflict in order to conclude that such a conflict in fact exists.” Id.

Where the Act “itself does not speak directly to the issue, the Court must be guided by the goals and policies of the Act in determining whether it in fact pre-empts an action based on the law of an affected State.” Int’l Paper Co., 479 U.S. at 493. Just as in International Paper Co., the federal law in question directly regulates the substantive law at issue (debt collection practices) and specifically empowers debtors to bring suit against debt collectors. 15 U.S.C. § 1692i; see Int’l Paper Co., 479 U.S. at 495 (holding that Vermont nuisance law was preempted to the extent that it conflicted with water pollution standards set forth in the Clean Water Act). And while the Act itself need not “speak directly to the issue,” Int’l Paper Co., 479 U.S. at 493, the FDCPA does expressly preempt state laws “to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency,” 15 U.S.C. § 1692n.

In addition to evading liability and preventing Arellano from pursuing her potential federal claims, the collection agency has literally used the execution mechanism to collect

debt from Arellano, and argues that she “has received the benefit of [the $250] reduction in her judgment.” But a debt collector cannot be allowed to use state law strategically to execute on a debtor’s FDCPA claims against it under the guise of legitimate debt collection. Though the FDCPA does preserve debt collectors’ rights to collect what they are owed, the Act does not “authorize the bringing of legal actions by debt collectors.” See 15 U.S.C. § 1692i(b). Debt collectors cannot evade the restrictions of the Act by forcing a debtor’s claims to be auctioned, acquiring the claims, and dismissing them. To allow otherwise would thwart enforcement of

the FDCPA and undermine its purpose. See 15 U.S.C. §§ 1692k, l.

C

Resolving this case does not require any additional or supplemental rule beyond the text of the Act. A state remedy of execution cannot be used for the purpose of avoiding the impact of federal law. Therefore, we reverse the district court, and remand for proceedings consistent with this opinion, holding that federal law preempts a private party’s use of state execution procedures to acquire and destroy a debtor’s FDCPA claims against it. We need not, and do not, reach any other issue urged by the parties.

REVERSED AND REMANDED.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PATRICIA ARELLANO,
Plaintiff-Appellant,
v.
CLARK COUNTY COLLECTION
SERVICE, LLC; BORG LAW GROUP,
LLC,
Defendants-Appellees.
No. 16-15467
D.C. No.
2:15-cv-01424-
JAD-NJK
OPINION
Appeal from the United States District Court
for the District of Nevada
Jennifer A. Dorsey, District Judge, Presiding
Argued and Submitted June 5, 2017
Pasadena, California
Filed November 17, 2017
Before: Sidney R. Thomas, Chief Judge, Stephen
Reinhardt, Circuit Judge, and Edward R. Korman,*
District Judge.
Opinion by Chief Judge Thomas
* The Honorable Edward R. Korman, United States District Judge for
the Eastern District of New York, sitting by designation.
ARELLANO V. CLARK CTY. 2 COLLECTION SERV.
SUMMARY**
Fair Debt Collection Practices Act
The panel reversed the district court’s dismissal of an
action brought against a debt collector under the Fair Debt
Collection Practices Act.
The panel held that a debt collector cannot avoid liability
under the FDCPA by obtaining the debtor’s lawsuit through
a state court writ of execution. The panel concluded that such
a procedure frustrates the Act’s purpose and is thus conflictpreempted.
The panel remanded the case for further
proceedings.
COUNSEL
Deepak Gupta (argued), Richard J. Rubin, and Neil K.
Sawhney, Gupta Wessler PLLC, Washington, D.C.; Keren E.
Gesund, Gesund & Pailet LLC, Las Vegas, Nevada; for
Plaintiff-Appellant.
Patrick J. Reilly (argued), Holland & Hart LLP, Las Vegas,
Nevada, for Defendants-Appellees.
** This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
ARELLANO V. CLARK CTY. COLLECTION SERV. 3

Does a debt buyer qualify as a debt collector under the FDCPA ?

On June 12, 2017, the Supreme Court issued an opinion in Henson v. Santander Consumer USA Inc., 137 S.Ct. 1718 (2017), where the Court resolved a split among the federal Courts of Appeals on whether purchasers of delinquent accounts, who then attempt to collect the defaulted debts, are considered debt collectors under the FDCPA. The Court ruled that Congress did not intend for debt buyers to be considered debt collectors for the purposes of the Act, where the debt buyer attempted to collect debts that the debt buyer now owned. Henson, 137 S.Ct. at 1724. 

But the issue is not completely resolved because the question was not answered categorically, and was limited to the particular factual scenario in that case, involving a particular debt buyer who was itself also a major original creditor, i.e. a lender that regularly originates its own loans. 

In Henson v. Santander Consumer USA Inc., 137 S.Ct. 1718 (2017), the Supreme Court specifically addressed only whether or not the defendant could be found a debt collector when attempting to collect debts owed to itself as opposed to "another." Henson, 137 S.Ct. at 1721.

In holding that the defendant didn't meet the definition of debt collector, the Henson Court appears to address circumstances where the owner of the debt, and regardless of the origins of the debt, cannot be considered a debt collector under the Act for attempting to collect a debt that they own. But the Henson Court also made clear that its holding in that matter was narrow, and did not address the applicability of "in any business the principal purpose of which is the collection of any debts[.]" Henson, 137 S.Ct. at 1721. 

To appreciate the subtleties, a careful reading of the SCOTUS opinion, written by the High Court's newest member, is called for. Note the highlighted disclaimer as to what the Supremes did not address. 


137 S.Ct. 810 (2017)

Ricky HENSON, et al., petitioners,
v.
SANTANDER CONSUMER USA, INC., et al.

No. 16-349.

Supreme Court of United States.

January 13, 2017.

Petition for writ of certiorari to the United States Court of Appeals for the Fourth Circuit granted.

RICKY HENSON, ET AL., Petitioners,
v.
SANTANDER CONSUMER USA INC.

No. 16-349.

Supreme Court of the United States.

Argued April 18, 2017. Decided June 12, 2017.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT.

GORSUCH, J., delivered the opinion for a unanimous Court

.

The Fair Debt Collection Practices Act authorizes private lawsuits and weighty fines designed to deter the wayward practices of "debt collector[s]," a term embracing anyone who "regularly collects or attempts to collect . . . debts owed or due . . . another." 15 U. S. C. §1692a(6). The complaint filed in this case alleges that CitiFinancial Auto loaned money to petitioners seeking to buy cars; that petitioners defaulted on those loans; and that respondent Santander then purchased the defaulted loans from CitiFinancial and sought to collect in ways petitioners believe violated the Act. The district court and Fourth Circuit held that Santander didn't qualify as a debt collector because it did not regularly seek to collect debts "owed . . . another" but sought instead only to collect debts that it purchased and owned.

Held:

A company may collect debts that it purchased for its own account, like Santander did here, without triggering the statutory definition in dispute. By defining debt collectors to include those who regularly seek to collect debts "owed . . . another," the statute's plain language seems to focus on third party collection agents regularly collecting for a debt owner—not on a debt owner seeking to collect debts for itself.

Petitioners' arguments to the contrary do not dislodge the statute's plain meaning. Petitioners point out that the word "owed" is the past participle of the verb "to owe," and so suggest that the debt collector definition must exclude loan originators (who never seek to collect debts previously owed someone else) but embrace debt purchasers like Santander (who necessarily do). But past participles like "owed" are routinely used as adjectives to describe the present state of a thing. Congress also used the word "owed" to refer to present debt relationships in neighboring provisions of the Act, and petitioners have not rebutted the presumption that identical words in the same statute carry the same meaning. Neither would reading the word "owed" to refer to present debt relationships render any of the Act's provisions surplusage, contrary to what petitioners suggest.

Petitioners also contend that their interpretation best furthers the Act's perceived purposes because, they primarily argue, if Congress had been aware of defaulted debt purchasers like Santander it would have treated them like traditional debt collectors because they pose similar risks of abusive collection practices. But it is not this Court's job to rewrite a constitutionally valid text under the banner of speculation about what Congress might have done had it faced a question that, on everyone's account, it never faced. And neither are petitioners' policy arguments unassailable, as reasonable legislators might contend both ways on the question of how defaulted debt purchasers should be treated. This fact suggests for certain but one thing: that these are matters for Congress, not this Court, to resolve. Pp. 3-11.

817 F. 3d 131, affirmed.

Justice GORSUCH, delivered the opinion of the Court.

Disruptive dinnertime calls, downright deceit, and more besides drew Congress's eye to the debt collection industry. From that scrutiny emerged the Fair Debt Collection Practices Act, a statute that authorizes private lawsuits and weighty fines designed to deter wayward collection practices. So perhaps it comes as little surprise that we now face a question about who exactly qualifies as a "debt collector" subject to the Act's rigors. Everyone agrees that the term embraces the repo man—someone hired by a creditor to collect an outstanding debt. But what if you purchase a debt and then try to collect it for yourself— does that make you a "debt collector" too? That's the nub of the dispute now before us.

The parties approach the question from common ground. The complaint alleges that CitiFinancial Auto loaned money to petitioners seeking to buy cars; that petitioners defaulted on those loans; that respondent Santander then purchased the defaulted loans from CitiFinancial; and that Santander sought to collect in ways petitioners believe troublesome under the Act. The parties agree, too, that in deciding whether Santander's conduct falls within the Act's ambit we should look to statutory language defining the term "debt collector" to embrace anyone who "regularly collects or attempts to collect . . . debts owed or due . . . another." 15 U. S. C. §1692a(6).

Even when it comes to that question, the parties agree on at least part of an answer. Both sides accept that third party debt collection agents generally qualify as "debt collectors" under the relevant statutory language, while those who seek only to collect for themselves loans they originated generally do not. These results follow, the parties tell us, because debt collection agents seek to collect debts "owed . . . another," while loan originators acting on their own account aim only to collect debts owed to themselves. All that remains in dispute is how to classify individuals and entities who regularly purchase debts originated by someone else and then seek to collect those debts for their own account. Does the Act treat the debt purchaser in that scenario more like the repo man or the loan originator?

For their part, the district court and Fourth Circuit sided with Santander. They held that the company didn't qualify as a debt collector because it didn't regularly seek to collect debts "owed . . . another" but sought instead only to collect debts that it purchased and owned. At the same time, the Fourth Circuit acknowledged that some circuits faced with the same question have ruled otherwise—and it is to resolve this conflict that we took the case. Compare 817 F. 3d 131, 133-134, 137-138 (2016) (case below); Davidson v. Capital One Bank (USA), N. A., 797 F. 3d 1309, 1315-1316 (CA11 2015), with McKinney v. Caldeway Properties, Inc., 548 F. 3d 496, 501 (CA7 2008); FTC v. Check Investors, Inc., 502 F. 3d 159, 173-174 (CA3 2007).

Before attending to that job, though, we pause to note two related questions we do not attempt to answer today. First, petitioners suggest that Santander can qualify as a debt collector not only because it regularly seeks to collect for its own account debts that it has purchased, but also because it regularly acts as a third party collection agent for debts owed to others. Petitioners did not, however, raise the latter theory in their petition for certiorari and neither did we agree to review it. 

Second, the parties briefly allude to another statutory definition of the term "debt collector"—one that encompasses those engaged "in any business the principal purpose of which is the collection of any debts." §1692a(6). But the parties haven't much litigated that alternative definition and in granting certiorari we didn't agree to address it either.

With these preliminaries by the board, we can turn to the much narrowed question properly before us. In doing so, we begin, as we must, with a careful examination of the statutory text. And there we find it hard to disagree with the Fourth Circuit's interpretive handiwork. After all, the Act defines debt collectors to include those who regularly seek to collect debts "owed . . . another." And by its plain terms this language seems to focus our attention on third party collection agents working for a debt owner— not on a debt owner seeking to collect debts for itself. Neither does this language appear to suggest that we should care how a debt owner came to be a debt owner— whether the owner originated the debt or came by it only through a later purchase. All that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for "another." And given that, it would seem a debt purchaser like Santander may indeed collect debts for its own account without triggering the statutory definition in dispute, just as the Fourth Circuit explained.

Petitioners reply that this seemingly straightforward reading overlooks an important question of tense. They observe that the word "owed" is the past participle of the verb "to owe." And this, they suggest, means the statute's definition of debt collector captures anyone who regularly seeks to collect debts previously "owed . . . another." So it is that, on petitioners' account, the statute excludes from its compass loan originators (for they never seek to collect debts previously owed someone else) but embraces many debt purchasers like Santander (for in collecting purchased debts they necessarily seek to collect debts previously owed another). If Congress wanted to exempt all present debt owners from its debt collector definition, petitioners submit, it would have used the present participle "owing." That would have better sufficed to do the job—to make clear that you must collect debts currently "owing . . . another" before implicating the Act.

But this much doesn't follow even as a matter of good grammar, let alone ordinary meaning. Past participles like "owed" are routinely used as adjectives to describe the present state of a thing—so, for example, burnt toast is inedible, a fallen branch blocks the path, and (equally) a debt owed to a current owner may be collected by him or her. See P. Peters, The Cambridge Guide to English Usage 409 (2004) (explaining that the term "past participle" is a "misnomer[], since" it "can occur in what is technically a present . . . tense"). Just imagine if you told a friend that you were seeking to "collect a debt owed to Steve." Doesn't it seem likely your friend would understand you as speaking about a debt currently owed to Steve, not a debt Steve used to own and that's now actually yours? In the end, even petitioners find themselves forced to admit that past participles can and regularly do work just this way, as adjectives to describe the present state of the nouns they modify. See Brief for Petitioners 28; see also B. Garner, Modern English Usage 666 (4th ed. 2016) (while "owing . . . is an old and established usage . . . the more logical course is simply to write owed").

Widening our view to take in the statutory phrase in which the word "owed" appears—"owed or due . . . another"— serves to underscore the point. Petitioners acknowledge that the word "due" describes a debt currently due at the time of collection and not a debt that was due only in some previous period. Brief for Petitioners 26-28. So to rule for them we would have to suppose Congress set two words cheek by jowl in the same phrase but meant them to speak to entirely different periods of time. All without leaving any clue. We would have to read the phrase not as referring to "debts that are owed or due another" but as describing "debts that were owed or are due another." And supposing such a surreptitious subphrasal shift in time seems to us a bit much. Neither are we alone in that assessment, for even petitioners acknowledge that theirs "may not be the most natural interpretation of the phrase standing in isolation." Id., at 26-27.

Given that, you might wonder whether extending our gaze from the narrow statutory provision at issue to take in the larger statutory landscape might offer petitioners a better perspective. But it does not. Looking to other neighboring provisions in the Act, it quickly comes clear that Congress routinely used the word "owed" to refer to present (not past) debt relationships. For example, in one nearby subsection, Congress defined a creditor as someone "to whom a debt is owed." 15 U. S. C. §1692a(4). In another subsection, too, Congress required a debt collector to identify "the creditor to whom the debt is owed." §1692g(a)(2). Yet petitioners offer us no persuasive reason why the word "owed" should bear a different meaning here, in the subsection before us, or why we should abandon our usual presumption that "identical words used in different parts of the same statute" carry "the same meaning." IBP, Inc. v. Alvarez, 546 U. S. 21, 34 (2005).

Still other contextual clues add to petitioners' problems. While they suggest that the statutory definition before us implicitly distinguishes between loan originators and debt purchasers, a pass through the statute shows that when Congress wished to distinguish between originators and purchasers it left little doubt in the matter. In the very definitional section where we now find ourselves working, Congress expressly differentiated between a person "who offers" credit (the originator) and a person "to whom a debt is owed" (the present debt owner). §1692a(4). Elsewhere, Congress recognized the distinction between a debt "originated by" the collector and a debt "owed or due" another. §1692a(6)(F)(ii). And elsewhere still, Congress drew a line between the "original" and "current" creditor. §1692g(a)(5). Yet no similar distinction can be found in the language now before us. To the contrary, the statutory text at issue speaks not at all about originators and current debt owners but only about whether the defendant seeks to collect on behalf of itself or "another." And, usually at least, when we're engaged in the business of interpreting statutes we presume differences in language like this convey differences in meaning. See, e.g., Loughrin v. United States,573 U. S. ___, ___ (2014).

Even what may be petitioners' best piece of contextual evidence ultimately proves unhelpful to their cause. Petitioners point out that the Act exempts from the definition of "debt collector" certain individuals who have "obtained" particular kinds of debt—for example, debts not yet in default or debts connected to secured commercial credit transactions. §§1692a(6)(F)(iii) and (F)(iv). And because these exemptions contemplate the possibility that someone might "obtain" a debt "owed or due . . . another," petitioners submit, the word "owed" must refer only to a previous owner. Ibid.This conclusion, they say, necessarily follows because, once you have "obtained" a debt, that same debt just cannot be currently "owed or due" another.

This last and quite essential premise of the argument, however, misses its mark. As a matter of ordinary English, the word "obtained" can (and often does) refer to taking possession of a piece of property without also taking ownership—so, for example, you might obtain a rental car or a hotel room or an apartment. See, e.g., 10 Oxford English Dictionary 669 (2d ed. 1989) (defining "obtain" to mean, among other things, "[t]o come into the possession or enjoyment of (something) by one's own effort or by request"); Kirtsaeng v. John Wiley & Sons, Inc., 568 U. S. 519, 532-533 (2013) (distinguishing between ownership and obtaining possession). And it's easy enough to see how you might also come to possess (obtain) a debt without taking ownership of it. You might, for example, take possession of a debt for servicing and collection even while the debt formally remains owed another. Or as a secured party you might take possession of a debt as collateral, again without taking full ownership of it. See, e.g., U. C. C. §9-207, 3 U. L. A. 197 (2010). So it simply isn't the case that the statute's exclusions imply that the phrase "owed . . . another" must refer to debts previously owed to another.

By this point petitioners find themselves in retreat. Unable to show that debt purchasers regularly collecting for their own account always qualify as debt collectors, they now suggest that purchasers sometimes qualify as debt collectors. On their view, debt purchasers surely qualify as collectors at least when they regularly purchase and seek to collect defaulted debts—just as Santander allegedly did here. In support of this narrower and more particular understanding of the Act, petitioners point again to the fact that the statute excludes from the definition of "debt collector" certain persons who obtain debts before default. 15 U. S. C. §1692a(6)(F)(iii). This exclusion, petitioners now suggest, implies that the term "debt collector" must embrace those who regularly seek to collect debts obtained after default. Others aligned with petitioners also suggest that the Act treats everyone who attempts to collect a debt as either a "debt collector" or a "creditor," but not both. And because the statutory definition of the term "creditor" excludes those who seek to collect a debt obtained "in default," §1692a(4), they contend it again follows as a matter of necessary inference that these persons must qualify as debt collectors.

But these alternative lines of inferential argument bear their own problems. For while the statute surely excludes from the debt collector definition certain persons who acquire a debt before default, it doesn't necessarily follow that the definition must include anyone who regularly collects debts acquired after default. After all and again, under the definition at issue before us you have to attempt to collect debts owed another before you can ever qualify as a debt collector. And petitioners' argument simply does not fully confront this plain and implacable textual prerequisite. Likewise, even spotting (without granting) the premise that a person cannot be both a creditor and a debt collector with respect to a particular debt, we don't see why a defaulted debt purchaser like Santander couldn't qualify as a creditor. For while the creditor definition excludes persons who "receive an assignment or transfer of a debt in default," it does so only (and yet again) when the debt is assigned or transferred "solely for the purpose of facilitating collection of such debt for another." Ibid. (emphasis added). So a company collecting purchased defaulted debt for its own account—like Santander— would hardly seem to be barred from qualifying as a creditor under the statute's plain terms.

Faced with so many obstacles in the text and structure of the Act, petitioners ask us to move quickly on to policy. Indeed, from the beginning that is the field on which they seem most eager to pitch battle. Petitioners assert that Congress passed the Act in large measure to add new incentives for independent debt collectors to treat consumers well. In their view, Congress excluded loan originators from the Act's demands because it thought they already faced sufficient economic and legal incentives to good behavior. But, on petitioners' account, Congress never had the chance to consider what should be done about those in the business of purchasing defaulted debt. That's because, petitioners tell us, the "advent" of the market for defaulted debt represents "`one of the most significant changes'" to the debt market generally since the Act's passage in 1977. Brief for Petitioners 8 (quoting Consumer Financial Protection Bureau, Fair Debt Collection Practices Act: CFPB Annual Report 2014, p. 7 (2014)). Had Congress known this new industry would blossom, they say, it surely would have judged defaulted debt purchasers more like (and in need of the same special rules as) independent debt collectors. Indeed, petitioners contend that no other result would be consistent with the overarching congressional goal of deterring untoward debt collection practices.

All this seems to us quite a lot of speculation. And while it is of course our job to apply faithfully the law Congress has written, it is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done had it faced a question that, on everyone's account, it never faced. See Magwoodv. Patterson, 561 U. S. 320, 334 (2010) ("We cannot replace the actual text with speculation as to Congress' intent"). Indeed, it is quite mistaken to assume, as petitioners would have us, that "whatever" might appear to "further[] the statute's primary objective must be the law." Rodriguez v. United States, 480 U. S. 522, 526 (1987) (per curiam) (emphasis deleted). Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage, and no statute yet known "pursues its [stated] purpose[] at all costs." Id., at 525-526. For these reasons and more besides we will not presume with petitioners that any result consistent with their account of the statute's overarching goal must be the law but will presume more modestly instead "that [the] legislature says . . . what it means and means . . . what it says." Dodd v. United States, 545 U. S. 353, 357 (2005) (internal quotation marks omitted; brackets in original).

Even taken on its own terms, too, the speculation petitioners urge upon us is far from unassailable. After all, is it really impossible to imagine that reasonable legislators might contend both ways on the question whether defaulted debt purchasers should be treated more like loan originators than independent debt collection agencies? About whether other existing incentives (in the form of common law duties, other statutory and regulatory obligations, economic incentives, or otherwise) suffice to deter debt purchasers from engaging in certain undesirable collection activities? Couldn't a reasonable legislator endorsing the Act as written wonder whether a large financial institution like Santander is any more or less likely to engage in abusive conduct than another large financial institution like CitiFinancial Auto? Especially where (as here) the institution says that its primary business is loan origination and not the purchase of defaulted debt? We do not profess sure answers to any of these questions, but observe only that the parties and their amici manage to present many and colorable arguments both ways on them all, a fact that suggests to us for certain but one thing: that these are matters for Congress, not this Court, to resolve.

In the end, reasonable people can disagree with how Congress balanced the various social costs and benefits in this area. We have no difficulty imagining, for example, a statute that applies the Act's demands to anyone collecting any debts, anyone collecting debts originated by another, or to some other class of persons still. Neither do we doubt that the evolution of the debt collection business might invite reasonable disagreements on whether Congress should reenter the field and alter the judgments it made in the past. After all, it's hardly unknown for new business models to emerge in response to regulation, and for regulation in turn to address new business models. Constant competition between constable and quarry, regulator and regulated, can come as no surprise in our changing world. But neither should the proper role of the judiciary in that process—to apply, not amend, the work of the People's representatives.

The judgment of the Court of Appeals is

Affirmed.

Federal Consumer Financial Protection Bureau CFPB Seeks Public's Input for Review of the Credit Card Sector

Per press-release dated March 17, 2015, federal consumer protection agency CFPB invites consumers to participate in study of practices of credit card issuers, and how they affect customers. Comments are due within sixty days after publication of the notice in the Federal Register.  

FOR IMMEDIATE RELEASE:  March 17, 2015 CONTACT: Office of Communications Tel: (202) 435-7170 CONSUMER FINANCIAL PROTECTION BUREAU LAUNCHES PUBLIC INQUIRY TO INFORM AGENCY REVIEW OF THE  CREDIT CARD MARKET  Bureau Seeks Stakeholder Input on How the Credit Card Market Is Functioning  WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) announced it is seeking public comment on how the credit card market is functioning and the impact of credit card protections on consumers and issuers. This public inquiry will focus on issues including credit card terms, the use of consumer disclosures, credit card debt collection practices, and rewards programs, among others.  “With today’s inquiry, the Bureau is seeking to further understand how the credit card market is working in practice and how credit card protections affect consumers and credit card issuers,” said CFPB Director Richard Cordray. “As we undertake this review, the Bureau wants to ensure it understands the information that consumers, industry, advocates, and other stakeholders believe is most relevant.”  In 2009, Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, with the goal of bringing fairness and transparency to the credit card market. The CARD Act requires that the CFPB conduct a review of the consumer credit market every two years. As part of that review, the Bureau is seeking public comment from consumers, credit card issuers, industry analysts, consumer advocates, and others on the state of the credit card market.  With today’s Request for Information, the CFPB is seeking to gather more information on how the credit card market is functioning and the continuing effects of the CARD Act on consumers. Some of the specific areas that the Bureau is requesting information on include:  The terms of credit card agreements and practices of credit card issuers: The Bureau wants to know how the terms and conditions of credit card agreements may have changed since it conducted its review of the credit card market two years ago. The Bureau is looking to see how card issuers may have changed their pricing, marketing, underwriting, or other practices and whether those changes have benefited or harmed consumers.  Unfair or deceptive acts or practices in the credit card market: The Bureau is looking for information on the extent to which unfair or deceptive acts and practices, or unlawful discrimination, may still exist in the credit card market and with what frequency and effect on consumers.  Debt collection practices within the credit card industry: The Bureau is looking for information on the collection of past due amounts on credit card accounts as well as debt collection practices within the credit card industry. Other areas the CFPB is seeking input on include how often card issuers use third-party collection agencies and how those relationships are managed.  Consumer understanding of rewards products: The Bureau is looking for information on how credit card issuers determine that their disclosures for rewards products are being made in a clear and transparent manner, whether consumers understand these offers when applying for rewards credit cards, and how disclosures may be improved to benefit consumers.  The CFPB review will culminate in a public report to Congress on the state of the consumer credit card market. The Bureau will use the data gathered to help inform future policy decisions on the topic.  A copy of today’s Request for Information, as submitted to the Federal Register, can be found at: http://files.consumerfinance.gov/f/201503_cfpb_card-act-report-rfi.pdf  Comments on the Request for Information are due within 60 days after publication in the Federal Register.  ### The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

Agency Profile from the Federal Register website: CFPB 

(Click image for better view) 

TILA's implications for defending debt collection suits (Truth in Lending Act)

THE FEDERAL TRUTH IN LENDING ACT (TILA) 

TILA is an acronym for the federal Truth in Lending Act. This is a law passed by the U.S. Congress that requires, among other things, that the bank disclose the interest rate(s) or method of determining the interest rate(s) (such as a margin added to an index or prime rate) and other financial terms in writing when consumers open credit accounts. It applies to consumer credit, not to business accounts.

While the TILA also provides a statutory cause of action for violations, its relevance in debt collection litigation consists primarily in the fact that the written terms are a federal regulatory requirement, and that a debt claims based on accounts subject to this law are necessarily predicated on written contract terms.

The federal law mandates disclosure so as to put the consumer in a position to accept or reject those terms, and to shop around for the best offer, and the best deal, based on meaningful comparisons. This regulatory requirement tracks the elements of contract formation under state law: first the offer, then the acceptance, assuming there is an agreement (“meeting of the minds”) on the terms. (See  -- >  contract formation).

TILA does not require a signed contract; what it requires is written disclosures of credit terms. Thus, when a creditor sues, the best evidence of the contract terms are the TILA disclosures, whether embedded in the cardmember agreement or in the form of a separate document (such as a Rates and Fees Table or Schedule) or a combination of both. If the terms changed (as shown on credit card statements), there must have been a notice of change in terms pursuant to TILA.

Arguably, the required disclosures under TILA should limit the creditor to breach of contract as a theory of recovery of consumer debt, but this issue has yet to be litigated in the courts of appeal. In the meantime, some courts of appeals in Texas have approved the use of alternative theories for debt collection, even if they do not require proof of the underlying contract/TILA disclosures. Under the state-law theory of Account Stated, as modified by some Texas courts of appeals, the creditor can seek a judgment for damages in the form of accrued interest (either as part of the account balance or claimed as a separate item of damages), without proving the credit terms that were offered and allegedly accepted by the consumer. Arguably, this is inconsistent with, and undermines, federal law, but it is not a violation that gives rise to the kind claim authorized by TILA itself.

For violations actionable under TILA, i.e. the creditor’s failure to make required disclosures to the consumer, the applicable statute of limitations is quite short: one year.

TILA’S LEGISLATIVE RATIONALE (CONGRESSIONAL PURPOSES AND INTENT) 

TILA's purpose is to promote the informed use of consumer credit by requiring disclosures about its terms and costs, and regulations give consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling." A person is a TILA consumer if the party to whom credit is offered or extended is a natural person, and the money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes. 15 U.S.C. § 1602(h)

The TILA requires creditors to disclose all of the credit terms to the consumer before the extension of credit is made, which allows the consumer to make an informed decision about the credit options that are available as well as serves as a way in which to prevent the consumer from being obligated to pay possible hidden and unreasonable charges unknowingly. 15 U.S.C. § 1601.

The TILA also requires lenders to issue new disclosures within a specified amount of time in the event that an interest rate adjustment occurs. 12 C.F.R. § 226.20(c)(1)-(5).

The purpose of TILA is to promote the informed use of credit by mandating a meaningful disclosure of credit terms to consumers.

The Federal Reserve Board (commonly known as "The FED") is charged with implementing and interpreting TILA. 15 U.S.C. § 1604; see also 12 C.F.R. Pt. 26 ("Regulation Z").

STATUTORY CAUSE OF ACTION UNDER TILA AND STATUTE OF LIMITATIONS

TILA is a federal consumer protection statute that provides consumers with a cause of action against creditors that fail to make required disclosures.

TILA requires a borrower who does not receive certain material disclosures to initiate an action for damages within one year of the violation. 15 U.S.C. § 1640(e).

Further, any claim under TILA for rescission of the loan transaction must be brought within three years of the violation. 15 U.S.C. § 1635(f). A failure to provide the required disclosures under TILA occurs at the time the contractual relationship between the lender and the borrower is consummated, i.e., at the time the loan documents are executed. Nondisclosure is not a continuing violation for purposes of the statute of limitations.

RECOUPMENT COUNTER-CLAIM MAY BE BROUGHT IN RESPONSE TO DEBT SUIT MORE THAN ONE YEAR AFTER TILA VIOLATION

 "A one-year statute of limitations governs claims brought under the Act, running from the date of each violation." Id. (citing 15 U.S.C.A. § 1640(e)). However, section 1640(e),

does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or setoff in such action, except as otherwise provided by State law.
15 U.S.C.A. § 1640(e); see Seidner v. Citibank (S. Dak.) N.A., 201 S.W.3d 332, 336-37 (Tex. App.-Houston [14th Dist.] 2006, pet. denied) (stating that "the thrust of subsection (e) is that a violation of the [TILA] can be raised as a defense by recoupment or set-off even after the one-year statute of limitations has expired on an affirmative claim for damages or penalties") (citing Beach, 523 U.S. at 412, 417-18) (discussing meaning of subsection (e))). In Garza v. Allied Finance Co., we defined "recoupment" as a form of counterclaim that is "a demand arising from the same transaction as the plaintiff's claim." 566 S.W.2d 57, 62 (Tex. Civ. App.-Corpus Christi 1978, no writ); see Seidner, 201 S.W.3d at 337 (explaining that the defense of recoupment allows a defendant to deduct any amounts accruing to him as a result of the same transaction that forms the basis of the action against him). "Although application of the recoupment defense will decrease the plaintiff's recovery, and may even wholly defeat any recovery, it does not act as an affirmative bar to the action." Seidner, 201 S.W.3d at 337. In Garza, we also distinguished "recoupment" from "offset," which we explained as a demand arising from "a transaction different than the one forming the basis of plaintiff's claim." 566 S.W.2d at 63.

CASELAW SNIPPETS - TILA IN TEXAS COURTS 

TILA protects consumers - business loans not covered 

One year SoL for TILA violations, but exception for recoupement claims 

Recoupement claim under the Truth in Lending Act (TILA) is similar to off-set and can thereby reduce amount of damages
awardeded to the creditor in a debt collections suit