The American Bankers Association and a group of financial trade associations expressed opposition today to the Non-Judicial Foreclosure Debt Collection Clarification Act (H.R. 2547), a bill that would reverse a Supreme Court decision clarifying that a business engaged in non-judicial foreclosure proceedings is not a debt collector.
The bill would reverse a unanimous March 2019 Supreme Court ruling in Obduskey v. McCarthy and Holthus LLP, which clarified that entities enforcing a security interest, without also seeking repayment or deficiency judgement, generally do not qualify as debt collectors under the Fair Debt Collection Practices Act.
“Our country’s mortgage lending system continues to rest on the foundation of enforceable security interests in real property,” the groups wrote in a joint letter to congressional leaders. “By allowing lenders to take possession of collateral through foreclosure when a borrower defaults, the law reduces the risk to lenders—which in turn allows them to make credit available to more homebuyers at a much lower interest rate than available for unsecured credit.” They added that more than half of states have designed their legal systems to provide for non-judicial foreclosures “which maintain significant state and federal procedural protections for borrowers while streamlining the foreclosure process.”