Lenders Score Major High Court Victory In Foreclosure Case - Obduskey v. McCarthy Decision Summary

Sep 15, 2026

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The U.S. Supreme Court issued a unanimous ruling in Obduskey v. McCarthy & Holthus LLP that narrows how creditors can be regulated when pursuing nonjudicial foreclosure. The decision holds that most foreclosure-related activities fall outside the Fair Debt Collection Practices Act, except for a specific provision tied to nonjudicial actions affecting property. The article outlines nonjudicial foreclosure procedures, the hybrid Colorado framework, and the dispute over whether the foreclosing law firm qualified as a “debt collector” under the statute’s primary and limited-purpose definitions.

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Obduskey v. McCarthy Supreme Court ruling

Impact on FDCPA coverage for nonjudicial foreclosure

Nonjudicial foreclosure process and state approaches

Colorado hybrid scheme and the case background

Statutory definitions of “debt collector” under FDCPA

Lenders Score Major High Court Victory In Foreclosure Case By John Baxter Law360 (March 21, 2019, 3:53 PM EDT) -- The United States Supreme Court issued its unanimous opinion in the case Obduskey v. McCarthy & Holthus LLP [1] on Wednesday, March 20. The court’s ruling effectively removes nearly all activities taken by creditors seeking nonjudicial foreclosure of liens and mortgages from the ambit of the Fair Debt Collection Practices Act, or FDCPA,[2] save for one provision. This decision resolves a circuit split and will have significant ramifications for all lenders and borrowers who live in jurisdictions that allow for nonjudicial foreclosure. Nonjudicial foreclosure is the practice by which a lender may foreclose on a security interest, typically a mortgage, with minimal court intervention—or no court intervention at all—pursuant to local laws and the terms of the contract creating the security agreement. Whereas judicial foreclosure traditionally requires the formalities of a full-fledged lawsuit, nonjudicial foreclosure, where allowed, is typically a faster and less rigorous process. Generally, the nonjudicial foreclosure process requires that a lender provide some sort of published notice of foreclosure, usually over a period of weeks, followed by a public, scheduled foreclosure sale. Some states, like Colorado—out of which the Obduskey case arises—require slight court oversight. Other states do not require any court intervention. Currently, 33 states and the District of Columbia allow for some form of nonjudicial foreclosure. The Obduskey case concerned a law firm, McCarthy & Holthus LLP, that was hired by Wells Fargoto carry out a nonjudicial foreclosure of a house in Colorado purchased by Dennis Obduskey after he defaulted on his mortgage. Colorado’s statutory nonjudicial foreclosure scheme is a hybrid style of nonjudicial foreclosure, in that it is initiated without filing a lawsuit, but does require court authorization prior to actually conducting the foreclosure sale. Following Colorado state procedure, McCarthy initiated the nonjudicial foreclosure process by sending a letter to Obduskey placing him on notice of the pending action. The next step for McCarthy to take under Colorado law would be to send a “notice of election and demand” to the “public trustee,” a Colorado state official. However, within 30 days of McCarthy sending the initial notice letter, Obduskey sent a “debt verification” letter to McCarthy, citing Section 1692g(b) of the FDCPA. Section 1692g(b) requires that a “debt collector” cease all collection activities until it provides the requesting borrower with a verification of the debt. Rather than provide the verification under Section 1692g(b), McCarthy moved forward with the nonjudicial foreclosure process by sending a notice to the public trustee. Obduskey then filed suit in federal court, alleging that McCarthy violated the FDCPA by continuing collection activities after receipt of the debt verification letter. The United States District Court for the District of Colorado dismissed Obduskey’s lawsuit, holding that McCarthy was not a “debt collector” under the FDCPA. The United States Court of Appeals for the Tenth Circuit affirmed the dismissal. Obduskey then filed and was granted a petition of certiorari to resolve a circuit split that was exacerbated by the Tenth Circuit’s ruling. The central question for the Supreme Court to address was whether McCarthy fell within the definition of “debt collector” under the FDCPA, as that term is defined in the act. The Supreme Court’s analysis began and ended with the statutory language of the FDCPA. Specifically, the court determined that the definition of “debt collector” in Section 1692a(6) of the FDCPA has two components: a “primary definition” and a “limited-purpose definition.”The “primary definition” defines “debt collector” as “any person ... in any business the principal purpose of which is the collection of any debts, or who

FAQs

What did the Supreme Court decide in Obduskey v. McCarthy & Holthus LLP?

The Court ruled unanimously that nonjudicial foreclosure efforts by creditors generally fall outside the FDCPA’s coverage, except for one limited provision.

How does the decision affect lenders and borrowers in states that allow nonjudicial foreclosure?

It limits FDCPA-based challenges to most creditor actions taken to pursue nonjudicial foreclosure, affecting both lenders’ compliance strategies and borrowers’ available defenses.

Why was the key legal issue whether the law firm was a “debt collector”?

The FDCPA definition of “debt collector” has both a primary definition and a limited-purpose definition tied to enforcing security interests, and the Court analyzed which definition applies in this context.

Sep 15, 2026

Uploaded by Franzy