August 1, 2016
by Richard Ullstrom
RCO Legal – Alaska, Inc.
USFN Member (Alaska, Oregon, Washington)
This article is expanded from one that appeared in the USFN e-Update (April 2016 Ed.).
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 it confined its activities solely 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 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 v. Ambridge, the foreclosure trustee sent the Ambridges a statutorily-required notice of default (NOD) that fully complied with Alaska law. However, the NOD did not state the total amount of the debt as required by the FDCPA for a first communication with the debtor, and was not followed up within five days by a statement of the total amount due. The Ambridges sued both the foreclosure trustee and its owner, who was not personally involved in the sending of the NOD. The Ambridges claimed that the NOD violated the FDCPA and UTPA, even though they had not been harmed or deceived by it in any way. The trial court ruled in favor of the Ambridges, and the Alaska Supreme Court affirmed.
On the FDCPA claim, although the weight of authority at the federal district court level was to the contrary, the Supreme Court chose to follow the line of cases holding 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 opinion contended 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. The Supreme Court did reverse the trial court as to the liability of the owner of the trustee company, ruling that personal involvement in the violation was necessary to give rise to liability.
On the UTPA claim, the majority ruled that the FDCPA violation also breached the UTPA because the FDCPA provided that a violation was to be considered an unfair or deceptive act or practice in violation 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 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.”
This judicial ruling is significant because the UTPA provides for an award of full attorney fees to a successful plaintiff, which will encourage borrowers’ attorneys to assert violations of the FDCPA or federal laws with similar provisions, such as the Truth in Lending Act. The Ambridge opinion is available at http://www.courtrecords.alaska.gov/webdocs/opinions/ops/sp-7084.pdf.
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