Ninth Circuit Affirms Finding That Defendant Trustee Was Not a “Debt Collector”

The United States Court of Appeals for the Ninth Circuit recently affirmed a district court’s holding that the trustee of a California deed of trust is not a “debt collector” under the Fair Debt Collection Practices Act (“FDCPA”) because the trustee only was enforcing a security interest.  See Ho. v. Recontrust Company, N.A., 840 F.3d 618 (9th Cir. 2016).  In the case, the plaintiff purchased a house using a loan that was secured by a deed of trust.  After the plaintiff began missing loan payments, the defendant trustee initiated a non-judicial foreclosure.  Pursuant to California’s statutory procedures governing non-judicial foreclosures, the defendant recorded a notice of default and mailed this notice to the plaintiff, which advised the plaintiff that she owed more than $20,000 on her loan and that her home “may be sold without any court action.”  The plaintiff did not pay, and the defendant recorded and mailed a notice of sale to the plaintiff, which advised the plaintiff that her home would be auctioned “unless [she took] action to protect [her] property.”  The plaintiff filed this lawsuit alleging that the defendant violated the FDCPA by sending her notices that misrepresented the amount of debt she owed.  The district court granted the defendant’s motion to dismiss the plaintiff’s FDCPA claim, holding that the defendant is not a debt collector under the statute. 

On appeal, the plaintiff argued that the defendant is a debt collector because the notice of default and notice of sale both constitute attempts to collect a debt.  She claimed that both notices threatened foreclosure unless the plaintiff paid the debt owed to the lender, and therefore the effective intent of these notices was to collect the debt.  The Court, however, viewed all of the defendant’s activities as the enforcement of a security interest and not the collection of a debt.  Although the Court acknowledged that the enforcement of a security interest and the collection of a debt are not mutually exclusive, they are not coextensive because “[t]he prospect of having property repossessed may, of course, be an inducement to pay off a debt. But that inducement exists by virtue of the lien, regardless of whether foreclosure proceedings actually commence.”  The Court further held that holding trustees liable under the FDCPA would subject them to obligations that would frustrate their ability to comply with the California statutes governing non-judicial foreclosure, and “[w]hen one interpretation of an ambiguous federal statute would create a conflict with state foreclosure law and another plausible interpretation would not, we must adopt the latter interpretation.”  In so holding, the Court rejected the holding of two other Circuit Courts that have found trustees to be debt collections under the FDCPA.  See Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 461 (6th Cir. 2013); Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 378-379 (4th Cir. 2006). 

For a copy of the decision, please contact Michael O’Donnell at or Michael Crowley at