Supreme Court: Foreclosure Firms Not Considered Debt Collectors Under FDCPA

The Supreme Court today ruled unanimously in the case of Obduskey v. McCarthy & Holthus LLP that a business engaged only in nonjudicial foreclosure proceedings is not a “debt collector” under the Fair Debt Collection Practices Act.

The case arose when a Colorado homeowner in 2009 defaulted on his Wells Fargo mortgage and the bank hired the law firm of McCarthy & Holthus LLP to carry out a nonjudicial foreclosure on the property. During the foreclosure process, the homeowner alleged that the bank violated the FDCPA’s debt validations procedures. While the law firm is subject to the FDCPA’s provisions specifically related to enforcing a security interest, the Supreme Court in its decision relied on the FDCPA text and legislative history to conclude that it is not a “debt collector” and therefore not subject to the remaining FDCPA provisions.

ABA filed an amicus brief in the case urging the Supreme Court to hold that the FDCPA does not apply to nonjudicial foreclosures.