Today, in a unanimous decision, the U.S. Supreme Court found that law firms performing nonjudicial foreclosures are not debt collectors under the Fair Debt Collection Practices Act (FDCPA). The Supreme Court's decision in Obduskey v. McCarthy & Holthus LLP, No. 17-1307 (Mar. 20 2019) can be found here.

The court found that while McCarthy & Holthus LLP is subject to the FDCPA’s provisions specifically related to enforcing a security interest, it is not subject to the remaining provisions of the statute since it does not fall within the scope of the primary definition of “debt collector.”

Most persuasive to the court was the text of the FDCPA itself, which provides a limited purpose definition as it relates to enforcing security interests. The statute states that “for the purpose of section 1692f(6),” the term debt collector “also includes” [emphasis added] those enforcing security interests. The court was satisfied that using the term “also” means that entities that enforce security interests do not fall into the primary definition of debt collector.

A look at the FDCPA’s legislative history, according to the Supreme Court, further supports this. The language of the statute was the result of a compromise between competing versions of the bill, one of which completely excluded security interest enforcement from the statute.

The court was unconvinced by Obduskey’s argument that the limited-purpose definition was meant to apply to those who enforce security interests but have no direct communication with consumers, such as “repo men” who repossess vehicles in the dark of night. This was a topic hotly debated at the oral arguments for this case back in January. In its final decision, the Supreme Court noted that many state laws require communication with the debtor during the repossession process.

In a concurring opinion, Justice Sotomayor invites Congress to clarify the statute if the Supreme Court read the opinion wrong and stresses that the Court’s opinion does not give “blanket immunity” to those enforcing security interests.

U.S. Supreme Court cases are binding in all jurisdictions, both federal and state, in the United States.

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