In its latest foray into the poorly drafted provisions of the Fair Debt Collection Practices Act, the Supreme Court unanimously decided today in Obduskey v. McCarthy & Holthus LLP that entities who engage in nonjudicial foreclosure either regularly or as their principal business are not (for that reason) "debt collectors" within the meaning of the Act, except for the limited purpose of application of a few provisions tailored to enforcement of security interests.
The Court acknowledged that foreclosing on security interests constitutes collection of debts under the ordinary meaning of those words and thus would have fallen within the Act's definition of debt collectors, which includes both entities whose business has the principal purpose of collection of debts and those who regularly collect debts on behalf of others. But because Congress added a provision to the Act that says the definition "also" includes those whose business is the enforcement of security interests, but only for purposes of one subsection of the act, the Court concluded that Congress must have meant not to include such entities within the definition of debt collectors for all purposes.
Got that? Congress wrote a definition of debt collectors that would include those engaged in nonjudicial foreclosure, but then effectively wrote them out of the Act by writing them into it for a narrower purpose.
That doesn't mean all bets are off for those engaged in nonjudicial foreclosures, because their other activities (including communications aimed at getting debtors to pay outside of the foreclosure process) may subject them to the FDCPA's provisions. And the decision specifically says it doesn't necessarily apply to judicial foreclosure, because judicial foreclosure usually involves more than just enforcement of security interests (that is, the proceedings usually seek a "deficiency judgment" against the debtor).
But it looks as if Congress, either intentionally or by sloppy drafting, left a major gap in the Act's coverage. Or so says the Supreme Court in an opinion drafted by a member of its liberal wing (Breyer) and joined by all his colleagues.
