The Obduskey Supreme Court Case and using the FDCPA to Stop Foreclosures in Non-Judicial States
The Fair Debt Collection Practices Act (FDCPA) regulates the activities of “debt collectors,” but the confusing and convoluted statutory definition of the gateway term itself has led to both extensive litigation and contradicting circuit decisions. However, in a recent unanimous opinion, Obduskey v. McCarthy, 586 U.S. ___ (2019), the United States Supreme Court has attempted to alleviate this confusion, at least with respect to nonjudicial foreclosures.
At issue before the court was whether a law firm engaged in a nonjudicial foreclosure action was a “debt collector” under the FDCPA.
As background, Obduskey, the mortgagor, defaulted upon his loan and, in compliance with Colorado law, received a letter from the lender’s law firm regarding the commencement of foreclosure proceedings. Obduskey disputed the debt in writing, thereby invoking §1692g(b) of the FDCPA, which requires a “debt collector” to “cease collection” until it “obtains verification of the debt.” Instead, the law firm proceeded with initiating a nonjudicial foreclosure action and Obduskey, in turn, filed a federal lawsuit alleging that the law firm failed to cease collection and verify the debt, in violation of the FDCPA.
The FDCPA’s definition for “debt collector” contains two parts, which the Supreme Court referenced as the “primary definition” and the “limited-purpose” definition. The “primary definition” states that a debt collector “means any person…in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or asserted to be owed or due another. 15 U.S.C. §1692a(6).” Read more