OBDUSKEY V. MCCARTHY & HOLTHUS

U.S. SUPREME COURT, CASE #17-1307 2018

The U.S. Supreme Court recently held in favor of law firms that handle foreclosures on behalf of lenders.  The opinion was issued March 20, 2019.

Wells Fargo hired the law firm McCarthy & Holthus LLP to carry out a nonjudicial foreclosure on a Colorado home after a default by Obduskey (“borrower”).  After receiving correspondence related to the foreclosure from the law firm, the borrower responded with a letter invoking a federal Fair Debt Collection Practices Act (“FDCPA”) provision which provides 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.  The law firm instead initiated a nonjudicial foreclosure action.  The borrower sued, alleging that the law firm failed to comply with the FDCPA’s verification procedure.

The determining factor was whether the law firm meets the definition of “debt collector.”  The court determined it did not because it was taking the necessary steps required under state law to enforce a security interest.  As such, the law firm was not subject to the verification of debt requirements.