FDCPA and Foreclosure: Update on Obduskey Case at the U.S. Supreme Court
Last year, the U.S. Supreme Court agreed to hear a case concerning a possible link between the Fair Debt Collection Practices Act (FDCPA) and businesses engaged in foreclosure proceedings. That case, Obduskey v. McCarthy & Holthus LLP, had the potential to expand the FDCPA’s definition of debt collectors to include certain attorneys who engage in debt collection practices. We discussed the case in some detail, and explained that, depending upon how the U.S. Supreme Court ruled on the case, Obduskey could have broader implications that ultimately could impact debtors in Illinois.
The Court heard the case in January, and it released its ruling on March 20, 2019. In short, in a unanimous ruling, the Court found that, in the specific case, the business engaged in nonjudicial foreclosure proceedings was not a “debt collector” under the FDCPA. However, the ruling was a narrow one. We want to say more about the case and its potential implications.
Facts of the Obduskey Case
Before we get into the U.S. Supreme Court’s decision, it is important to get a brief reminder about the facts of the Obduskey case. Back in 2007, Dennis Obduskey bought a house with a mortgage through Wells Fargo Bank. Obduskey defaulted on his mortgage. Wells Fargo Bank hired a law firm “to act as its agent in carrying out a nonjudicial foreclosure,” according to the facts of the case. That law firm is the defendant in the case, McCarthy & Holthus LLP.
The law firm, according to Obduskey, sent a letter indicated that Wells Fargo Bank had “instructed [it] to commence foreclosure” against Obduskey’s home. The letter provided information about the amount Obduskey owed on the property, it identified the creditor as Wells Fargo Bank, and it indicated that it was providing fair notice “[p]ursuant to, and in compliance with” the FDCPA.
Obduskey disputed the amount owed. He argued that, under the FDCPA, a debt collector is required to cease collection until it is able to verify the debt. However, Obduskey alleged that the defendant continued collection activities and never provided verification of the debt. Ultimately, the U.S. Supreme Court had to determine whether an entity that is “principally involved in the enforcement of security interests” is a debt collector under the FDCPA.
Narrow Application to Nonjudicial Foreclosure Processes in Certain Situations
The Court ruled that an entity engaged in conducting a nonjudicial foreclosure is not a “debt collector” under the FDCPA broadly, and that such an entity is only a debt collector for the limited purpose of § 1692f(6). The Court focused on the fact that the plain language of the FDCPA suggests that a narrow interpretation is appropriate. It also looked to the legislative history of the FDCPA and reasoned that Congress considered expanding the definition of “debt collector” but did not do so. Accordingly, the plaintiff Obduskey loses.
For anyone living in Oak Park or elsewhere in the Chicago area, it is important to note here that nonjudicial foreclosures do not happen in Illinois. To be clear, Illinois is a judicial foreclosure state, which means that all foreclosures must go through the court. In Colorado, where the Obduskey case originated, nonjudicial foreclosures are possible. While a finding in favor of the plaintiff could have suggested a broader application of the FDCPA in such a way that Illinois residents may have benefited, the Court did emphasize that Congress is free to expand the FDCPA.
Contact an Oak Park Consumer Protection Lawyer
If you have questions about your rights under the FDCPA, an experienced Oak Park consumer protection lawyer can help. Contact the Emerson Law Firm to speak with an advocate about your situation.
The Court heard the case in January, and it released its ruling on March 20, 2019. In short, in a unanimous ruling, the Court found that, in the specific case, the business engaged in nonjudicial foreclosure proceedings was not a “debt collector” under the FDCPA. However, the ruling was a narrow one. We want to say more about the case and its potential implications.
Facts of the Obduskey Case
Before we get into the U.S. Supreme Court’s decision, it is important to get a brief reminder about the facts of the Obduskey case. Back in 2007, Dennis Obduskey bought a house with a mortgage through Wells Fargo Bank. Obduskey defaulted on his mortgage. Wells Fargo Bank hired a law firm “to act as its agent in carrying out a nonjudicial foreclosure,” according to the facts of the case. That law firm is the defendant in the case, McCarthy & Holthus LLP.
The law firm, according to Obduskey, sent a letter indicated that Wells Fargo Bank had “instructed [it] to commence foreclosure” against Obduskey’s home. The letter provided information about the amount Obduskey owed on the property, it identified the creditor as Wells Fargo Bank, and it indicated that it was providing fair notice “[p]ursuant to, and in compliance with” the FDCPA.
Obduskey disputed the amount owed. He argued that, under the FDCPA, a debt collector is required to cease collection until it is able to verify the debt. However, Obduskey alleged that the defendant continued collection activities and never provided verification of the debt. Ultimately, the U.S. Supreme Court had to determine whether an entity that is “principally involved in the enforcement of security interests” is a debt collector under the FDCPA.
Narrow Application to Nonjudicial Foreclosure Processes in Certain Situations
The Court ruled that an entity engaged in conducting a nonjudicial foreclosure is not a “debt collector” under the FDCPA broadly, and that such an entity is only a debt collector for the limited purpose of § 1692f(6). The Court focused on the fact that the plain language of the FDCPA suggests that a narrow interpretation is appropriate. It also looked to the legislative history of the FDCPA and reasoned that Congress considered expanding the definition of “debt collector” but did not do so. Accordingly, the plaintiff Obduskey loses.
For anyone living in Oak Park or elsewhere in the Chicago area, it is important to note here that nonjudicial foreclosures do not happen in Illinois. To be clear, Illinois is a judicial foreclosure state, which means that all foreclosures must go through the court. In Colorado, where the Obduskey case originated, nonjudicial foreclosures are possible. While a finding in favor of the plaintiff could have suggested a broader application of the FDCPA in such a way that Illinois residents may have benefited, the Court did emphasize that Congress is free to expand the FDCPA.
Contact an Oak Park Consumer Protection Lawyer
If you have questions about your rights under the FDCPA, an experienced Oak Park consumer protection lawyer can help. Contact the Emerson Law Firm to speak with an advocate about your situation.
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