Corporate Accountability

Obduskey v. McCarthy & Holthus LLP

In Obduskey v. McCarthy & Holthus LLP, the Supreme Court considered whether non-judicial foreclosure qualifies as debt collection under the Fair Debt Collection Practices Act (FDCPA).

Case Summary

In 2007, Colorado resident Dennis Obduskey obtained a $329,940 home loan. Two years later, he defaulted on the loan, and his creditor retained respondent—a law firm—to initiate a non-judicial foreclosure, a process by which a trustee is authorized to take and sell a consumer’s home to fulfill an unpaid home mortgage. Obduskey filed a complaint with the Consumer Financial Protection Bureau and sued in federal district court, alleging that respondent violated the FDCPA by, among other things, failing to provide the written verification of the debt to which he was entitled under the FDCPA. The district court held that Obduskey failed to state a claim because the FDCPA does not apply to non-judicial foreclosure. The U.S. Court of Appeals for the Tenth Circuit affirmed the district court’s ruling. In March 2018, Obduskey asked the Supreme Court to hear his case, and the Supreme Court agreed to do so.

CAC filed a friend-of-the-court brief in the Supreme Court on behalf of members of Congress in support of Obduskey. In our brief, we explained that under the plain text of the FDCPA, non-judicial foreclosures qualify as debt collection. After all, a home mortgage is a debt, and non-judicial foreclosure is a means of obtaining payment for that debt, either by prompting a consumer to pay the debt in order to avoid foreclosure, or by selling the home through the foreclosure process and using the proceeds to pay the debt. Moreover, holding that non-judicial foreclosure is debt collection accords with Congress’s plan in passing the FDCPA. Congress passed the FDCPA to prevent debt collectors from engaging in deceptive and harassing practices in their communications with consumers, and these practices are at least as common in communications regarding non-judicial foreclosure as they are in other types of debt collection communications. Finally, while some courts have suggested that treating non-judicial foreclosure as debt collection would undermine state foreclosure laws, our brief explains that these laws do not conflict with the FDCPA. Moreover, if a state law did conflict with the FDCPA, the FDCPA explicitly preempts that state law. Thus, purported conflicts with state law provide no reason to interpret the Act in a manner that is inconsistent with its text and Congress’s plan in passing it.

The court held that businesses engaged in non-judicial foreclosure do not qualify as debt collectors under the FDCPA. Though the Court acknowledged that non-judicial foreclosure would otherwise fit within the broad definition of “debt collector,” the Court held that the secondary definition of “debt collector,” which applies to the collection of a security interest, suggested that Congress intended for non-judicial foreclosure to be excluded from the broader definition. In a concurrence, Justice Sotomayor noted that it was “too close a case for [her] to feel certain that Congress recognized that this complex statute would be interpreted the way that the Court does today,” and that Congress could clarify the statute if the Court got it wrong. She also highlighted the majority’s acknowledgement that nothing in the Court’s opinion “‘suggest[s] that pursuing nonjudicial foreclosure is a license to engage in abusive debt collection practices like repetitive nighttime phone calls; enforcing a security interest does not grant an actor blanket immunity from the Act.'”

Case Timeline

  • June 28, 2018

    Supreme Court grants certiorari

  • September 17, 2018

    CAC files amicus brief

    U.S. Sup. Ct. Amicus Brief
  • January 7, 2019

    The Supreme Court hears oral arguments

  • March 20, 2019

    The Supreme Court issues its decision

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