April 5, 2016
by Richard Ullstrom
RCO Legal – Alaska, Inc. – USFN Member (Alaska)
A divided Alaska Supreme Court has ruled that nonjudicial foreclosures constitute “debt collection” under the federal Fair Debt Collection Practices Act (FDCPA), making a foreclosure trustee a “debt collector” even if the trustee confined its activities to those required to process the foreclosure. The Court also held that an FDCPA violation was per se a violation of the Alaska Unfair Trade Practices and Consumer Protection Act (UTPA), departing from established case law holding that the UTPA did not apply to transactions involving real property, including nonjudicial foreclosures.
In Alaska Trustee, LLC v. Ambridge, the foreclosure trustee sent the Ambridges a statutorily-required Notice of Default (NOD) that complied with Alaska law but which did not state the total amount of the debt as required by the FDCPA. The Ambridges sued, claiming that this violated the FDCPA and UTPA, although they had not been deceived by the NOD in any way. The trial court ruled in favor of the Ambridges, and the Alaska Supreme Court affirmed.
On the FDCPA claim, the Supreme Court chose to follow the line of cases determining that foreclosure constituted “debt collection” even when no demand for payment of the debt was made and the actions of the foreclosure trustee were only those needed to enforce the creditor’s security interest in the collateral. The dissenting justice opined that this nullified the exclusion of enforcers of security interests from most of the FDCPA, but the majority reasoned that this exclusion applied only to auto repossession agencies and similar entities.
On the UTPA claim, the majority ruled that the FDCPA breach also violated the UTPA because the FDCPA provided that a violation was to be considered an unfair or deceptive act or practice in contravention of the Federal Trade Commission Act (FTCA). The Alaska UTPA, in turn, prohibits unfair or deceptive acts or practices and requires that the Alaska courts give consideration to interpretations of the FTCA in applying the UTPA. Thus, even though the NOD was not objectively unfair or deceptive, it was considered a UTPA violation simply because it violated the FDCPA. In reaching this result, the Supreme Court distinguished longstanding precedent that the UTPA did not apply to real property transactions, including foreclosures, by noting that “there are different avenues to coverage under the UTPA.”
The ruling in Ambridge is significant because the UTPA provides for an award of full attorney fees to a successful plaintiff, which will encourage borrowers’ attorneys to find violations of the FDCPA or federal laws with similar provisions, such as TILA.
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