To Be or Not to Be . . . a Debt Collector

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In Obduskey v. McCarthy & Holthus L.L.P., the Supreme Court examined whether an entity engaged in the limited purpose of enforcing a security interest in a nonjudicial foreclosure proceeding fit the definition a “debt collector,” thereby subjecting it to all of the provisions of the Fair Debt Collectors Practices Act (“FDCPA”). The Supreme Court unanimously ruled that the Respondent, McCarthy & Holthus LLP (“McCarthy”), hired by Wells Fargo to enforce its security interest by acting as its agent to foreclose on a defaulting, Colorado debtor’s home, in that narrow instance, was not a “debt collector” within the meaning under the FDCPA, except with regard to the confines of §1692f(6). In order to reach its decision, the Court partitioned the FDCPA’s definition of a “debt collector” into two parts: (1) a ‘primary’ debt collector defined as “any person . . . in any business the principal purpose of which is the collection of any debt, or who regularly collects or attempts to collect, directly or in-directly, debts[;]” and (2) for the purposes of §1692f(6) of the FDCPA, a ‘limited-purpose’ debt collector defined as also including “any person . . . in any business the principal purpose of which is the enforcement of security interests.”

As there was no factual dispute that McCarthy, if anything, was a limited-purpose debt collector, the question was one of legislative intent – specifically, with regard to the use of the word also in §1692a(6)’s third sentence and whether the same should be interpreted to mean that those actors, such as McCarthy, solely acting as security-interest enforcers are exempt from the broader consumer protections afforded by the FDCPA and, therefore, only subjected to those per §1692f(6). By deciding that entities that fall within the limited purpose definition are only subject to §1692f(6), has the Court, as argued by the Petitioner, granted license to agent-actors, like McCarthy, to run afoul of the very abusive acts and practices the FDCPA aims to prevent? In her concurring opinion, Justice Sotomayor disagrees with such negative foreshadowing, citing the fact that per the ruling only those actors engaging in conduct authorized by state law governing the enforcement of security interests will remain within the purview of the limited-purpose definition.


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