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Supreme Court Holds That A Law Firm Conducting Foreclosures Is Not A “Debt Collector” Under the Fair Debt Collection Practices Act

California Supreme Court Rules Foreclosure Purchasers Need To Record Their Trustees Deed Before StarThis week the Supreme Court issued their opinion in Obduskey v. McCarthy & Holthus LLP. In 2007, Obduskey bought a house in Colorado, borrowed $330k from a lender and secured repayment of the loan with a mortgage (or deed of trust) against the house. In 2014, Wells Fargo hired the law firm of McCarthy & Holthus LLP to commence foreclosure as the borrower was in default.

The firm sent a letter to borrower as required under state law to commence the foreclosure. The opinion did not publish the text of that initial letter but I suspect it contained a “mini Miranda” which is common in demand letters, ie, that this could be considered an attempt to collect a debt under the Fair Debt Collection Practices Act. (“FDCPA”). The borrower disputed the debt and invoked section 1692g)b of the FDCPA which would require a debt collection to cease collection until it obtains verification of the debt.

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