Foreclosure and the FDCPA: Introduction to a Complicated Relationship
This video introduces the issue of whether and how the Fair Debt Collection Practices Act (FDCPA) applies to Foreclosure. As part of this page we will link a series of posts addressing specific issues, with a small textual introduction to provide context and a description of the video to follow. Each video will also be based upon an article, and this will be on the same page as the video.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) is a law that, primarily, applies to “debt collectors” who are “collecting debts” (as those terms are defined by the statute. Foreclosure and all the actions leading to it are clearly attempts to collect a debt. Whether the FDCPA will be applied to them, on the other hand, is not so clear. Currently, it appears that a majority of the district courts that have ruled on the question have found that the FDCPA does not apply.
Most of the circuit courts of appeal addressing the question, on the other hand, have held that it does. Eventually the law will probably catch up with common sense and the broad remedial purpose of the FDCPA, but for now whether the Act will apply to foreclosure may depend on where you live – and what court you file your suit in. In this essay we will first discuss the arguments in favor of applying the FDCPA to foreclosure, then the arguments against it, and finally will compare the relative merits of the arguments.
This article will provide you the case law and arguments you will need to decide what to do and defend whatever choice you make. The good news for anyone seeking to apply the FDCPA to foreclosure is that even the jurisdictions that have held it does not apply have exceptions that open the door to a considerable extent. In whatever jurisdiction you use, you will need to know all the arguments.
Foreclosure is the process by which the holder of a foreclosable interest (a lien or mortgage) causes the property to be sold, all the interests in the property to be divided, prioritized, and paid off according to priority. It does not necessarily lead to a change in possession of the property (i.e., who lives in the house), although it often does. It is about changing the rights of ownership and cutting off the rights of the subservient interests. Click here for more on Foreclosure, its history and function.
Applying the FDCPA to Foreclosure
The arguments in support of applying the FDCPA to foreclosure are both numerous and intuitive. The legal purpose of foreclosure is to collect a debt, whether the process requires the filing of a lawsuit and judgment (judicial) or is simply a formal process that does not require a judgment (non-judicial). Foreclosure is designed to allow for the original owner to take the property, sell it, and use the money to pay off a debt. The foreclosure process has often been abused and in ways similar to other debt collection techniques; nothing in the Act itself exempts foreclosure; and several parts of the Act strongly suggest that foreclosure was intended to be included.
Despite the strength of the arguments in favor of applying the FDCPA to the Foreclosure process, the courts are divided on whether to do so. Click here for much more on foreclosure and the FDCPA.