Obduskey v. McCarthy & Holthus LLP

Justia Summary

The McCarthy law firm was hired to carry out a nonjudicial foreclosure on Obduskey’s Colorado home. Obduskey invoked the Fair Debt Collection Practices Act (FDCPA) provision, 15 U.S.C. 1692g(b), providing that if a consumer disputes the amount of a debt, a “debt collector” must “cease collection” until it “obtains verification of the debt” and mails a copy to the debtor. Instead, McCarthy initiated a nonjudicial foreclosure action.

The Tenth Circuit and Supreme Court affirmed the dismissal of Obduskey’s suit, holding that McCarthy was not a “debt collector.” A business engaged in only nonjudicial foreclosure proceedings is not a “debt collector” under the FDCPA, except for the limited purpose of section 1692f(6). The FDCPA defines “debt collector” an “any person . . . in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts.” The limited-purpose definition states that “[f]or the purpose of section 1692f(6) . . . [the] term [debt collector] also includes any person . . . in any business the principal purpose of which is the enforcement of security interests.” McCarthy, in enforcing security interests, is subject to the specific prohibitions contained in 1692f(6) but is not subject to the FDCPA’s main coverage. Congress may have chosen to treat security-interest enforcement differently from ordinary debt collection to avoid conflicts with state nonjudicial foreclosure schemes; this reading is supported by legislative history, which suggests that the present language was a compromise between totally excluding security-interest enforcement and treating it like ordinary debt collection.