Obduskey v. McCarthy & Holthus, LLP
United States Court of Appeals, Tenth Circuit, January 19, 2018.
879 F.3d 1216
FACTS Petitioner Mr. Dennis Obduskey stated that congress’s FDCPA (Fair Debt Collection Practices Act) lacks legislation to protect consumers by the actions of Wells Fargo Bank and law firm McCarthy ; Holthus, LLP. Mr. Obduskey obtained a home loan of $329,940 from the Magnus Financial Corporation which was later sent to Wells Fargo Bank. This made Mr. Obduskey pay under different loan modifications that the bank offered him. However, the bank claimed a non-judicial foreclosure of the property by their law firm McCarthy ; Holthus, LLP due to the petitioner not making his payments. McCarthy ; Holthus, LLP sent a letter to Mr. Obduskey stating that they could be “considered as a debt collector attempting to collect debt.” Later Mr. Obduskey replied to their letter arguing about the debt, but instead of the bank sending a debt validation(reply) to Mr. Obduskey to be contacted by the law firm, they initiated a new foreclosure to is property.
Obduskey alleged that Wells Fargo was a “debt collector” and their actions violated the FDCPA. Their actions included the debt validation because of their failure to provide verification of the debt before commencing a non-judicial foreclosure. However, Wells Fargo and McCarthy ; Holthus, LLP filed a proposal to dismiss which the court granted them. The court stated that Wells Fargo was not liable since it gave the loan prior to Mr. Obduskey’s loan default and the law firm was not considered a “debt collector” because the act of foreclosure is not a collection of debt.
ISSUE Whether FDCPA applies to non-judicial foreclosure proceedings.
DECISION No. The FDCPA is not obligated to make consumers pay for non -judicial foreclosures. Non-judicial foreclosure does not permit the collection of money.
REASON The district court held that Wells Fargo bank is not a debt collector under FDCPA because the petitioner was not with the bank when they started to give the loan and when it became part of their debt. The district court also held that McCarthy & Holthus, LLP is not a “debt collector” under the FDCPA because the complaint made by the petitioner did not state that the law firm took any payment from him. The non-judicial foreclosure allows the creditor to only secure the property that is being sold, but it does not permit the creditor to obtain any money from it. The court of appeals used the Ninth circuit court’s reasoning in Ho v. ReconTrust Co. that a foreclosure without payment does not deem as a “debt collector” and that the activities done are outside the premises of the FDCPA.