On March 20, the U.S. Supreme Court unanimously affirmed a 2018 10th Circuit decision, holding that law firms performing nonjudicial foreclosures are not “debt collectors” under the FDCPA. Justice Breyer delivered the opinion, which resolves whether FDCPA protections apply to nonjudicial foreclosures conducted by law firms. (Covered by InfoBytes here.) Three considerations led to the Court’s conclusion. First, the Court held that a business pursuing nonjudicial foreclosures would be covered by the Act’s primary definition of a debt collector. However, the Act goes on to state that for the purpose of a specific section, the definition of debt collector “also includes” a business of which the principal purpose is the enforcement of security interests. The Court determined that this phrase only makes sense if such businesses were not covered by the primary definition. Second, the Court noted that Congress appeared to have chosen to differentiate between security-interest enforcers and ordinary debt collectors in order “to avoid conflicts with state nonjudicial foreclosure schemes.” Third, the Court noted that the legislative history of the FDCPA indicated that the final result was likely a compromise between two competing versions of the bill, one of which would have excluded security-interest enforcement entirely, and another that would have treated it as ordinary debt collection.
Justice Sotomayor, in a concurring opinion, wrote that the Court’s statutory interpretation was a “close case” and urged Congress to clarify the statute if the Court has “gotten it wrong.” She noted that making clear that the FDCPA fully encompasses entities pursuing nonjudicial foreclosures “would be consistent with the FDCPA’s broad, consumer-protective purposes.” Justice Sotomayor also stated that the Court’s ruling does not give license to those pursuing nonjudicial foreclosures “to engage in abusive debt collection practices like repetitive nighttime phone calls” and that enforcing a security interest does not grant an actor blanket immunity from the Act.”