Supreme Court opens door (a bit) to argument that in rem foreclosures not covered by FDCPA

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Supreme Court opens door (a bit) to argument that in rem foreclosures not covered by FDCPA

Supreme Court opens door (a bit) to argument that in rem foreclosures not covered by FDCPA

JD SUPRA-

On March 20, 2019 in Obduskey v. McCarthy & Holthus LLP, a unanimous U.S. Supreme Court held that the primary definition of a “debt collector” under the Fair Debt Collection Practices Act (FDCPA) does not apply to an entity that engages in no more than security-interest enforcement. As a result, most of the debt-collector-related prohibitions of the FDCPA (besides the limited prohibitions of Section 1692f(6)) do not apply to such an entity.

Obduskey involved a defendant law firm who had been hired by Wells Fargo Bank, N.A. to carry out a Colorado nonjudicial foreclosure in regard to a home loan on which the plaintiff had defaulted. The defendant law firm first sent the plaintiff a letter setting forth that it had been instructed to commence foreclosure against the property, disclosing the amount owed and identifying the creditor. The letter purported to provide notice pursuant to and in compliance with both the FDCPA and Colorado law.

In response to the letter, the plaintiff invoked § 1692g(b) of the FDCPA and disputed the debt.  Under the FDCPA, that would typically mean that a “debt collector” would need to cease collection until obtaining verification of the debt and mailing a copy to the debtor. Instead, the defendant law firm proceeded with the nonjudicial foreclosure.

The plaintiff filed suit in federal court alleging that the defendant had violated the FDCPA. The district court dismissed on the grounds that the law firm was not a “debt collector” within the meaning of the FDCPA. The Tenth Circuit affirmed on appeal. The U.S. Supreme granted certiorari.

[JD SUPRA]

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