Reading the FDCPA: Are Foreclosure Actors Debt Collectors Under the Law?

A recent case to go before the U.S. Supreme Court, Obduskey v. McCarthy Holthus LLP, raises an issue that links foreclosure actions with the Fair Debt Collection Practices Act (FDCPA). More specifically, the issue in the case is whether a party taking foreclosure actions can be defined as a debt collector under the FDCPA, and thus whether a homeowner who is being subjected to those foreclosure actions has rights related to the foreclosure under the FDCPA. We will say more about the case and how its outcome could impact both homeowners and consumers more generally in the Oak Park, Illinois area.

Facts of Obduskey v. McCarthy Holthus LLP

The facts of the case are relatively simple. The plaintiff and homeowner, Dennis Obluskey, took out a mortgage in 2007 through Magnus Financial Corporation. His mortgage ultimately was sold to Wells Fargo, which then became the mortgage servicer. The homeowner got behind on mortgage payments between 2007 and 2009. By 2009, Wells Fargo began a nonjudicial foreclosure.

As a side note, Illinois is not a nonjudicial foreclosure state. To be clear, states in the U.S. either are judicial foreclosure states or nonjudicial foreclosure states. Illinois is a judicial foreclosure state, which means that any foreclosure needs to go through the court system. Nonjudicial foreclosure states allow a lender to foreclose on a home without going through the court system. Although the case at issue arises out of a nonjudicial foreclosure state, its outcome nonetheless could affect the rights of homeowners and consumers in judicial foreclosure states given that it could expand the definition of “debt collector” under the FDCPA.

Now, back to the facts of the case. In the language of the foreclosure notice to the homeowner, Wells Fargo indicated that its counsel, McCarthy Holthus LLP, “may be considered a debt collector attempting to collect a debt.” McCarthy, however, did not ask the homeowner to make any payments on the debt. The homeowner later filed a claim alleging that McCarthy and Wells Fargo violated the FDCPA.

Does the FDCPA Apply in Any Foreclosure Cases?

The question that the U.S. Supreme Court will need to address is whether the FDCPA is applicable in any foreclosure cases, and specifically in nonjudicial foreclosures. The case previously was heard by the 10th Circuit, which concluded—in line with a previous decision from the 9th Circuit—that the FDCPA is not applicable in nonjudicial foreclosure cases. Other circuits have disagreed. For example, the U.S. Courts of Appeals for the 4th Circuit, the 5th Circuit, and the 6th Circuit all have determined that the FDCPA does apply in these foreclosure cases. The 7th Circuit, which hears cases out of Illinois, has not ruled on the issue.

Are threats of foreclosure attempts to collect debts? Do such foreclosure attempts then make lenders debt collectors in certain circumstances? The Supreme Court will hear the case on January 7, 2019, and the decision likely will be handed down in May or June. If the Supreme Court determines that lawyers who are carrying out foreclosure proceedings are debt collectors under the FDCPA, it would broaden the scope of who can be a debt collector under the law and thus would broaden the types of situations in which a consumer may have FDCPA protections.

Contact an Oak Park Consumer Protection Lawyer

If you have questions about the FDCPA and consumers’ rights and protections, you should speak with an Oak Park consumer protection attorney. An advocate at our firm can discuss your situation with you. Contact the Emerson Law Firm for more information.



See Related Blog Posts:
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Avoiding Credit Card Debt in Chicago this Holiday Season

Dealing with substantial credit card debt can be frustrating, and it may feel as though you will never be able to get ahead. During the holiday season, many Chicago residents, along with consumers across the country, will spend hundreds and sometimes thousands of dollars on gifts, decorations, and holiday travel. For many families, the additional expenses that accrue during the holidays are beyond their monthly budget. What happens when families do not have the necessary cash to pay for holiday costs? By and large, many of them turn to credit cards. For those Americans who are already struggling with credit card debt, the holidays can be a particularly difficult time.

In some cases, consumers who have unmanageable credit card debts may be eligible for personal bankruptcy. However, consumers cannot simply plan to file for Chapter 7 bankruptcy and, before doing so, rack up additional credit card debt during the holidays. Regardless of your plans for bankruptcy, it is important to consider ways of avoiding additional credit card debt this holiday season.

Costs are High for Holiday Spending, from Gifts to Seasonal Travel

How much do Chicago residents spend, on average, over the holidays? Each year, the American Research Group, Inc. conducts surveys to determine how much the average household plans to spend during the holiday season. According to its fact sheet, last year the average spending per adult totaled $882. That total represents a 2% increase from the previous year, in which the average spending per adult was listed as $861. For some, this might not sound like a lot of money to spend during the entire holiday season. However, this number is the average of spending on Christmas gifts alone. In other words, it does not include purchases for holiday meals, decorations, and other expenses associated with the season.

If the average adult is spending nearly $900 alone on gifts—a number that likely goes well above $1,000 when adding in other costs—how is the average adult paying for these items? According to a recent article in Forbes Magazine, many Americans are swayed by the in-store discounts associated with store credit cards. However, as the article clarifies, these credit cards often serve only to put consumers deeper into debt.

Spending on Credit in Illinois During the Holidays

Last year alone, we mentioned that the average American adult spend $861 on gifts. According to the Forbes article, holiday spending in general “sent the average American $986 deeper into debt.” Many of those debtors decided to use store credit cards in order to receive particular discounts and other perks. In the long run, however, store credit cards may only encourage more spending—of money that consumers do not have—making the small discounts and perks negligible.

Most importantly, consumers need to recognize the different between waived interest and deferred interest. Most store credit cards that offer 0% financing offers during the holidays have deferred interest, which means that all of the interest will come due if you do not pay off the balance within a certain period. Moreover, the APR on a store credit card is typically very high. For instance, a Lowes card “charges a flat APR of 26.99%.” In brief, unless you can afford to pay of the balance in a relatively short period of time, relying on store credit cards to make holiday purchases can set you back further in the long run.

If you have questions about managing consumer debt or filing for personal bankruptcy, an Oak Park bankruptcy lawyer can assist you. Contact the Emerson Law Firm today.

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Protecting Widows and Widowers from Foreclosure

What happens is your spouse passes away unexpectedly and your name is not on your home loan? Generally speaking, if you are not having financial difficulties, you may be able to simply continue making monthly mortgage payments without any hassle. However, how will a mortgage servicer look at a widow or widower who is not on the original note but needs help with a mortgage modification? These situations can get complicated, and they can easily result in the surviving spouse having to contend with the possibility of foreclosure. According to a recent article in the Los Angeles Times, the Consumer Financial Protection Bureau (CFPB) has issued new rules that aim to prevent widowed homeowners from going into foreclosure.

Complications and Difficulties for Widowed Homeowners

Widowed homeowners tend to have a lot of trouble obtaining mortgage modifications. What is the issue? Often, survivors, including those who previously owned their homes through marriage or inherited them through the death of a spouse, run into difficulty with servicers. Even though they have a legitimate claim to the house following the death of a spouse, their names might not be listed on the original mortgage note. As such, when they have get behind on mortgage payments—often due to the death of the spouse—they cannot deal with the mortgage servicer in the same manner that the spouse who is the person listed on the loan.

As the article explains, “often companies won’t allow a modification until the surviving spouse assumes the loan, which can’t happen until the owner is current on the mortgage—something of a Catch-22.” Additionally, surviving spouses have complained that mortgage servicers do not provide accurate or up-to-date information about the documentation they need to provide in order to be listed on the mortgage in order to be eligible for a modification.

Given these facts, it can be extremely difficult for a surviving spouse to avoid foreclosure when they cannot afford mortgage payments. What is the CFPB doing to help?

New CFPB Rules to Protect Surviving Spouses from Foreclosure

Recognizing that many surviving spouses are at risk of foreclosure in the weeks and months following the death of the other spouse, the CFPB has announced new rules to protect those widowed spouses. Earlier this month, the CFPB said that its regulations will “generally give surviving spouses who are not on a mortgage note the same protections borrowers have.” The regulations will also protect against dual-tracking, which is a process “in which mortgage servicers negotiate with clients to modify a mortgage while simultaneously pursuing foreclosure.”

When will surviving spouses begin receiving these protections? The article highlights that the new rules are scheduled to take effect about a year and a half from now. But just because surviving spouses will have these protections does not mean that they will be able to obtain a mortgage modification regardless of other factors. To be sure, widowed spouses still will need to provide evidence in support of a modification, and the servicer will not be required to provide it.

Contact an Oak Park Foreclosure Defense Lawyer

If you have questions about avoiding foreclosure, an Oak Park foreclosure defense lawyer can help. Contact the Emerson Law Firm today to learn more about how we can help with your situation.

See Related Blog Posts:

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Report Shows Noticeable Decrease in “Zombie” Foreclosures