April 25, 2017
by Joshua Schaer
RCO Legal, P.S. – USFN Member (Oregon, Washington)
On March 31, 2017, the Ninth Circuit Court of Appeals issued a published opinion in Dowers v. Nationstar Mortgage, LLC, which was on appeal from the U.S. District Court for Nevada [_F.3d __, 2017 WL 1192207 (9th Cir. 2017)].
The plaintiff-borrowers sued loan servicer Nationstar and investor Wells Fargo Bank Minnesota for FDCPA violations, intentional infliction of emotional distress, and violations under the Nevada Deceptive Trade Practices Act. The district court dismissed all claims pursuant to Fed. R. Civ. P. 12(b)(6).
On appeal, the decision was affirmed in all respects except as to one claim; i.e., an alleged violation of 15 U.S.C. § 1692f(6). The Ninth Circuit cited Ho v. ReconTrust, 840 F.3d 618 (9th Cir. 2016) for the proposition that § 1692a(6)’s definition of “debt collector” includes security interest enforcers, who are regulated only through § 1692f(6). The remainder of the FDCPA does not govern nonjudicial foreclosure activity, which is not considered “debt collection.”
The Ninth Circuit’s reasoning in Dowers, however, appears to overlook the parties’ posture in the Ho litigation. Ho specifically “affirms the leading case” of Hulse v. Ocwen Federal Bank, 195 F. Supp. 2d 1188 (D. Or. 2002), which held that “foreclosing on a trust deed is an entirely different path” than “collecting funds from a debtor.” See Ho, at 621.
Contrasting Pre-Ho Case Law
In Hulse, the borrowers pled violations based on the entire FDCPA, which necessarily encompassed § 1692f(6). (Hulse, at 1202: “Plaintiffs allege that OFB violated the federal Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o ….”). Critically, Hulse particularly referenced the “narrow definition” in § 1692a(6) when holding that foreclosing on property pursuant to a deed of trust is not “within the terms of the FDCPA.” Hulse at 1204, citing Heinemann v. Jim Walter Homes, Inc., 47 F. Supp. 2d 716 (D.W.Va. 1998), aff’d, 173 F.3d 850 (4th Cir. 1999) (which cited to the same “narrow definition”).
By contrast, the parties in Ho explicitly conceded that the foreclosure trustee defendant was “a debt collector under the narrow definition” (in 15 U.S.C. § 1692a(6)) that would otherwise prohibit conduct under § 1692f(6). Ho, at 622: “All parties agree that ReconTrust is a debt collector under the narrow definition.” Moreover, in Ho, ReconTrust was not even accused of a § 1692f(6) violation. Consequently, it appears that except for the parties’ agreement to the applicability of § 1692a(6) — and §1692f(6) by extension — the clear adoption of Hulse’s and Heinemann’s reasoning would prohibit any FDCPA claim related to nonjudicial foreclosure activity.
In fact, this is precisely what numerous district court judges within the Ninth Circuit have held over the past few years. See, e.g., Wear v. Sierra Pacific Mortgage Company, Inc., 2013 WL 6008498, *5 (W.D. Wash. Nov. 12, 2013) (“Courts have routinely held that foreclosure does not constitute ‘debt collection’ under the FDCPA.”); Bostrom v. PNC Bank, N.A., 2012 WL 3904379, *6 (D. Idaho Aug. 17, 2012), report and recommendation adopted, 2012 WL 3905872 (D. Idaho Sept. 7, 2012) (“[C]ases interpreting the FDCPA have held that loan servicers, lenders, mortgage companies, and trustees appointed pursuant to a deed of trust are not ‘debt collectors,’ a prerequisite for application of Section 1692f(6).”); Roman v. Northwest Trustee Services, Inc., 2010 WL 5146593 (Dec. 13, 2010) (“Foreclosing on a trust deed is distinct from the collection of the obligation to pay money”). The Roman plaintiff specifically pled a § 1692f(6) violation against the trustee. See Case No. 10-05585-BHS (W.D. Wash.), Dkt. No. 1 at 5, 19. These cases were all either silently overruled by Ho, or else there is something more nuanced that led to the Ho decision — such as the parties’ agreement to the application of § 1692a(6) and/or the borrower’s failure to plead a § 1692(f)(6) violation in the underlying action.
In sum, while federal courts within the Ninth Circuit will likely take it as a foregone conclusion that § 1692f(6) applies to nonjudicial foreclosure after Dowers, it may be worth reminding judges of the above-referenced facts. Perhaps one or more courts will recognize that Ho cannot be intellectually reconciled with Hulse’s reasoning absent the Ho parties’ stipulation concerning § 1692a(6) being given effect.
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