Sixth Circuit deems foreclosure attorneys 'debt collectors'

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Lawyers who regularly handle mortgage foreclosures in the Sixth Circuit are considered 'debt collectors' by the jurisdiction's top court, making them potentially liable under the Fair Debt Collection Practices Act, according to a new opinion from the U.S. Court of Appeals for the Sixth Circuit.

The circuit's justices made that decision in January, applying it to foreclosure attorneys and lawyers whose principal business is mortgage foreclosure.

The decision applies to parties in the Sixth Circuit and essentially trumps lower, district court opinions that held foreclosure practice 'is not debt collection' under the provisions of The FDCPA, according to the final opinion.

The FDCPA subjects debt collectors to civil liabilities for violating debt collection guidelines outlined in the act. Attorneys with Ballard Spahr consider the ruling significant within the Sixth Circuit. 

"In the Sixth Circuit's view, any activity whose purpose is to obtain payment of a debt 'is properly considered debt collection' and 'every mortgage foreclosure, judicial or otherwise, is undertaken for the very purpose of obtaining payment on the underlying debt,'" Ballard Spahr wrote.

In a report covering the decision, Ballard Spahr added [3] "the Sixth Circuit refused to follow cases that have held mortgage foreclosure is not debt collection under the FDCPA because it involves the enforcement of security interests."

The Second, Third, Fourth and Eleventh Circuits apply the same standard, Ballard Spahr said.

kpanchuk@housingwire.com [4]