Supreme Court Hears Arguments in Case Debating ‘Debt Collector’ Definition Under FDCPA

The Supreme Court yesterday heard arguments in a case that seeks to define what constitutes a “debt collector” under the Fair Debt Collection Practices Act, in relation to whether law firms engaging in non-judicial disclosures meet the definition under the statute.

Published reports indicated that the eight justices who heard arguments — Justice Ruth Bader Ginsburg missed the session, the first time that has happened in her 25 years on the bench — were split on the issue, but not along traditional ideological faultlines.

The case — Obduskey v. McCarthy & Holthus LLP — is on appeal from the Court of Appeals for the Tenth Circuit, which affirmed a District Court ruling that the FDCPA did not apply to non-judicial foreclosures.

Foreclosures are either judicial, in which the property in question is secured by a mortgage, or non-judicial, where the property is secured by a deed of trust. Nineteen states allow for non-judicial foreclosures.

The plaintiff originally filed suit alleging the defendant violated the FDCPA because the plaintiff was not provided with a written verification of the debt. But because the District Court ruled the FDCPA did not apply to non-judicial foreclosures, the verification was not needed.

Chief Justice John Roberts and Justice Brett Kavanaugh, normally pro-business conservatives, appeared “skeptical” of the law firm’s arguments that it should not be considered a debt collector, according to a published report.

A transcript of yesterday’s hearing is available by clicking here.

Justice Elena Kagan, when commenting on the composition of the FDCPA, noted that the law says the law firm can either be a collector or it can be enforcing a security interest, but not both. Justice Sonia Sotomayor, according to the published report, disagreed with that statement. Her takeaway is that the case is about “unfair” practices.

One published report indicated that Justice Neil Gorsuch could end up being the swing vote on the case.

A ruling on the case is expected this summer.

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