Bowles Rice Bankruptcy e-Alert
SCOTUS
Supreme Court Settles Circuit Split,
Finds Law Firms Are Not "Debt Collectors"

By: Julie Chincheck, Esq. and Alexandra Shulz, Esq.

On March 20, 2019, the United States Supreme Court issued a much-anticipated decision in the case of Obduskey v. McCarthy & Holthus LLP. The decision resolved a split among the U.S. Courts of Appeals and resulted in victory for the mortgage industry and the law firms that support it. In a 9-0 decision, the Court held that businesses engaged in security-interest enforcement (i.e., nonjudicial foreclosure proceedings) are not “debt collectors” subject to the Fair Debt Collection Practices Act (“FDCPA”), provided that the businesses do no more than the bare minimum required by state law to enforce the security interest.

While the case was pending before the Court, 19 separate entities, including the Legal League, filed nine Amicus briefs in support of the law firm of McCarthy & Holthus, LLP. The Court ultimately sided with the law firm because McCarthy & Holthus, LLP took only the steps the state law required in its communications with Obduskey which, in this case, involved sending notices initiating a nonjudicial foreclosure. As the Court noted, mandatory notices are designed to protect consumers by providing them with information about the status of their mortgages and are not an attempt to collect a debt.

The ruling is significant for mortgage lenders, mortgage servicers, and legal professionals because it precludes a homeowner’s use of the FDCPA to stop or delay entities pursuing nonjudicial foreclosure and gives lenders more protection in nonjudicial foreclosures.


For more information:
For more information about this e-alert, please contact a member of the Bowles Rice Creditor's Rights and Bankruptcy Team:

Julie Chincheck
304-347-1713

Alexandra Shulz
304-347-1117

Julie Shank
304-230-1804

Zachary Rosencrance
304-347-1161

Michael Proctor
724-514-8934

Nicola Smith
304-264-4239


Bowles Rice is a Full-service Law Firm
For more information, visit our website:
www.bowlesrice.com

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