Supreme Court Rules On Non-Judicial Foreclosure Under The Fair Debt Collection Practices Act

On March 20, 2019, the Supreme Court ruled in the case of Obduskey v. McCarthy & Holthus LLP that a law firm that carries out non-judicial foreclosure proceedings would not be considered a "debt collector" pursuant to the Fair Debt Collection Practices Act ("FDCPA"), other than for a limited purpose.

In the case, Dennis Obduskey purchased a home using a mortgage loan that was secured by the property he purchased. Two years later, Mr. Obduskey defaulted on the loan and the lender subsequently retained a law firm - McCarthy & Holthus LLP - to conduct a non-judicial foreclosure. McCarthy & Holthus LLP told Mr. Obduskey that it had been retained to start foreclosure proceedings, disclosed the amount outstanding on the loan and identified the creditor. Mr. Obduskey requested verification of the amount owed as required by Section 1692g(6) of the FDCPA. Instead of ceasing collection efforts and supplying verification of the debt, McCarthy & Holthus LLP instituted a non-judicial foreclosure.

As explained more fully in a Cadwalader memorandum, the Supreme Court ultimately determined that McCarthy & Holthus LLP was not a "debt collector" and thus was not subject to the full reach of the FDCPA. In the opinion, the Supreme Court stated that foreclosure is a means of collecting a debt and determined the actions undertaken by McCarthy & Holthus LLP in pursuing a non-judicial foreclosure did subject it to the mandates of the FDCPA with the...