The Supreme Court has agreed to hear arguments in a Fair Debt Collection Practices Act case related to whether non-judicial foreclosures are covered by the law.
The petitioner in this case — Obduskey v. McCarthy & Holthus — is a homeowner who defaulted on his mortgage and had non-judicial foreclosure proceedings initiated against him, argued that the servicer sent him a letter which said that it “may be considered a debt collector attempting to collect a debt,” and “any information obtained will be used for that purpose.” The petitioner subsequently disputed the amount of the debt and “invoked the FDCPA’s debt-validation procedures, which required respondent to cease all collection activity until confirming the validity of the debt and providing the necessary documentation to petitioner.” The servicer did not do that.
The petitioner then filed a lawsuit against the servicer. The District Court granted a motion from the servicer to dismiss the case, a decision which was appealed to the Tenth Circuit Court of Appeals, which upheld the dismissal. That ruling was appealed to the Supreme Court.
Whether the FDCPA applies to non-judicial foreclosure is a divided issue among the Circuit Courts. From the petitioner’s request:
This question is binary: If petitioner is right, courts and parties are wasting substantial time litigating whether the FDCPA even applies, rather than resolving disputes on the merits. If respondent is right, plaintiffs are filing hundreds or thousands of lawsuits that should never be filed (and wrongly winning in multiple circuits and dozens of district courts). Until this Court intervenes, the rampant confusion over this important threshold question will persist. The Court’s immediate review is warranted.
The potential consequences of the case are far-reaching. There were about 400,00 total foreclosures in 2016, according to a published report, about half of which were non-judicial in nature.
