Editor’s Note: The following alert was originally published by Barron & Newburger, PC, November 8, 2024, regarding the recent decision in Povey v. Castle & Cooke Mortgage, 3:23-cv-01388-IM (D. Or. Nov. 6, 2024). Reprinted and adapted with permission.
In Obduskey v. McCathy & Holthus, LLP, 586 U.S. 466 (2019), the United States Supreme Court took up the question of “[w]hether the FDCPA applies to non-judicial foreclosure proceedings.” The Fair Debt Collection Practices Act (FDCPA) defines “debt collector” as “any person who uses any instrumentality of interstate commerce or the mails 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 owed or due or asserted to be owed or due another.” 15 USC § 1692a(6). The Court concluded that nonjudicial foreclosure falls within the scope of that definition:
It is true that, as McCarthy points out, nonjudicial foreclosure does not seek “a payment of money from the debtor” but rather from sale of the property itself. Brief for Respondent 17 (emphasis added). But nothing in the primary definition requires that payment on a debt come “from a debtor.” The statute speaks simply of the “collection of any debts . . . owed or due.” §1692a(6). Moreover, the provision sweeps in both “direc[t]” and “indirec[t]” debt collection. Ibid. So, even if nonjudicial foreclosure were not a direct attempt to collect a debt, because it aims to collect on a consumer’s obligation by way of enforcing a security interest, it would be an indirect attempt to collect a debt.
However, the Supreme Court in Obduskey concluded that the FDCPA’s express limitation on the applicability of the act to “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests” leads to the conclusion that “but for §1692f(6), those who engage in only nonjudicial foreclosure proceedings are not debt collectors within the meaning of the Act.”
A number of states have “fair debt” laws containing definitions similar to the FDCPA. The Oregon Unfair Debt Collection Practices Act (OUDCPA) defines “debt collector” as “a person that by direct or indirect action, conduct or practice collects or attempts to collect a debt owed, or alleged to be owed, to a creditor or debt buyer.” ORS 646.639(1)(h).
The United States District Court for the District of Oregon was recently presented with the question of whether nonjudicial foreclosures fall within the scope of the OUDCPA in the case of Povey v. Castle & Cooke Mortgage. Applying the above-quoted reasoning of Obduskey, the federal court concluded that nonjudicial foreclosure is “debt collection” under the OUDCPA. And because the Oregon statute contains no limitation on its applicability to the enforcement of security interests, the court held that nonjudicial foreclosure is subject to the OUDCPA.
We note that the reasoning employed by the court below could be employed in interpreting the California RFDCPA, the Maryland CDCA, the Massachusetts Attorney General’s debt collection regulations, and the Texas Debt Collection Act, each of which applies not only to third-party debt collectors but also to creditors that are collecting their own debts.
Manuel H. Newburger and Brit J. Suttell
Barron & Newburger, PC
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