Maryland Legal Alert for Financial Services
Foreclosure Trustee Cannot be "Debt Collector" Under FDCPA
The 9th Circuit Court of Appeals recently rejected reasoning provided by both the 4th Circuit and 6th Circuit and affirmed a district court's holding that a trustee of a deed of trust is not a "debt collector" under the Fair Debt Collection Practices Act (FDCPA). The 9th Circuit reasoned that a trustee was not a debt collector when it initiated a non-judicial foreclosure in accordance with California law because the actions of the trustee served only to perfect a security interest and were not properly viewed as attempts to collect a debt. Because California law required a trustee to mail a notice of the outstanding debt to the property owner after the trustee recorded its notice of default, the act of holding a trustee liable under the FDCPA could create conflict with the federal statute and a state's foreclosure laws. The 9th Circuit further opined that its principal disagreement with decisions from other circuits like the 4th Circuit (see our April 2006 Legal Bulletin), was that other Circuits viewed the objective of foreclosure as the payment of money, while the 9th Circuit viewed foreclosure as protecting and recovering upon a security interest (and therefore outside of the FDCPA). Please contact Robert Gaumont if you have any questions about this topic.