Financial Services Litigation

The linchpin of the Federal Fair Debt Collection Practices Act (“FDCPA”) is debt collection. Not surprisingly, litigation often focuses on the crucial question of what is a “debt” and who is a “debt collector” for purposes of the FDCPA. In Ho v. ReconTrust Co., NA, the U.S. Court of Appeals for the Ninth Circuit recently concluded that the enforcement of a security instrument by nonjudicial foreclosure is not debt collection as a matter of law.

The Ho court explained that “[t]he object of a non-judicial foreclosure is to retake and resell the security, not to collect money from the borrower[,]” and because “California law does not allow for a deficiency judgment following non-judicial foreclosure[,]” “the foreclosure extinguishes the entire debt even if it results in a recovery of less than the amount of the debt.” On this basis, the Ho court held that “actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect ‘debt’ as that term is defined by the FDCPA.” Continue Reading <em>McNair v. Maxwell & Morgan PC</em>: Judicial and Nonjudicial Foreclosure—A Distinction With a Difference