April 18, 2017 / 5:24 PM / 4 months ago

U.S. Supreme Court hesitant to expand debt collection abuse law

WASHINGTON, April 18 (Reuters) - The U.S. Supreme Court on Tuesday appeared skeptical of widening the scope of who can be subject to a federal law targeting debt collectors' abusive practices by including those who buy debt, sometimes for pennies on the dollar.

The justices heard oral arguments in a proposed consumer class action lawsuit against Santander Consumer USA Holdings Inc over allegations it violated the Fair Debt Collection Practices Act. A lower court had dismissed the case.

That law typically applies to entities whose primary purpose is debt collection for others, not to lenders who give out and collect their own loans, such as banks or full-service finance companies.

The justices, both liberal and conservative, seemed to suggest that the law is not as elastic as the plaintiffs in the case - car buyers who defaulted on their auto loans - want it to be.

"Just look at the language," liberal Justice Elena Kagan told the plaintiff's lawyer, Kevin Russell. "Can you come up with a sentence that points to your reading?"

"I acknowledge that may not be the first interpretation," Russell replied.

Four Maryland residents who defaulted on car loans filed the class action in 2012 in federal court alleging violations of the debt collection law, such as misrepresenting debt loads and bypassing debtors' lawyers.

The debts were told to Santander, a Dallas-based consumer finance company specializing in car loans, owned in part by a subsidiary of Banco Santander, the euro zone's second-largest bank by market value. Santander then tried to collect on the loans.

Reporting by Andrew Chung; Editing by Will Dunham

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