Case No. 17-1307, 10th Cir.
Preview by Michelle Divelbiss, Online Editor
This case involves the Fair Debt Collection Practices Act (“FDCPA”) and whether a certain kind of debt falls under the provisions of the FDCPA. 15 U.S.C. § 1692 (2018). A debt collector regulated by the FDCPA includes any person or entity “who regularly collects . . . debts owed or due” and also includes “any business the principal purpose of which is the enforcement of security interests.” Id. § 1692a(6). If a debtor disputes the validity of a debt, a debt collector must stop collection efforts until the debt is verified. Id. § 1692g(b).
Here, Petitioner Obduskey secured a loan from a bank with residential property. Petitioner later defaulted on the loan, and after 2011, no additional payments were made. In 2014, Respondent McCarthy & Holthus LLP was hired by the bank to institute a foreclosure on the residential property. This type of foreclosure is considered a non-judicial foreclosure and is governed by state law. Although this type of foreclosure is non-judicial, a court order is required, which certifies that there is a “reasonable probability that a default justifying the sale has occurred.” Colo. R. Civ. P. 120(d)(1)(D) (2018).
Petitioner claims that he responded to the non-judicial foreclosure proceedings by asking for verification of the debt and did not receive any response. Under the FDCPA, Respondent would have been required to cease debt collection while under state law Respondent need not cease debt collection as long as Respondent had satisfied the steps required for state non-judicial foreclosure.
Both the district court and the court of appeals held that Respondent’s actions did not fall under the FDCPA because Respondent was not attempting to collect money as a debt collector. Instead, the Tenth Circuit agreed with the Ninth Circuit and found that Respondent was only attempting to enforce a security interest, which is “not inherently an attempt to collect money,” and that Respondent therefore does not qualify as a debt collector under the FDCPA. Brief for Respondent at 10, Obduskey v. McCarthy & Holthus LLP, No. 17-1307 (U.S. filed Nov. 7, 2018). The Sixth Circuit, however, has held that the collectors of non-judicial mortgage foreclosures are considered debt collectors under the FDCPA. Although the Supreme Court has previously denied certiorari to a case addressing the same issue, the Court will likely settle the circuit split.