March 29, 2019

Foreclosure and the FDCPA: A Look at Obduskey v. McCarthy & Holthus LLP

On March 20, 2019, the Supreme Court issued its decision in Obduskey v. McCarthy & Holthus LLP, a case in which the Court considered whether attorneys or law firms engaged in nonjudicial foreclosures are “debt collectors” subject to the Fair Debt Collection Practices Act (“FDCPA”). In Obduskey, after being retained to carry out a nonjudicial residential foreclosure in Colorado, the law firm received a letter from the consumer disputing the debt, thus potentially triggering FDCPA provisions requiring a debt collector to cease collection until the debt is verified. Instead of ceasing collection, the law firm initiated a nonjudicial foreclosure action, followed by the consumer’s suit against the law firm alleging a violation of the FDCPA.

The Court held that except in limited instances expressly set forth in the FDCPA (i.e., those FDCPA provisions expressly related to nonjudicial foreclosures), businesses engaged in nothing more than nonjudicial foreclosures is not a “debt collector” under the FDCPA.

In reaching this conclusion, the Court relied on several considerations. First, the Court relied on the language of the FDCPA itself. After setting forth the primary definition of a “debt collector,” the FDCPA includes a “limited purpose definition” that says: “[f]or the purpose of section 1692f(6)[, which specifically discusses nonjudicial foreclosures,] of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principle purpose of which is the enforcement of security interests.” 15 U.S.C.§ 1692a(6) (emphasis added). By including the word “also,” the FDCPA itself suggested that nonjudicial foreclosure do not fall within the ambit of the primary definition of a “debt collector.” Second, the Court considered the fact that “Congress may well have chosen to treat security interest enforcement differently from ordinary debt collection in order to avoid conflicts with state nonjudicial foreclosure schemes.” Finally, the Court relied on the FDCPA’s legislative history, which suggests that the FDCPA’s final language was the result of competing versions of the bill.

Premium Content For:
  • Business Law Section
  • CL1903SPR - 2019 Business Law Section Spring Meeting