On October 19, a divided Ninth Circuit ruled that a trustee of a deed of trust who takes action to initiate non-judicial foreclosure is not a “debt collector” under the Fair Debt Collection Practices Act (FDCPA). See Ho v. ReconTrust Co., NA, No., 10-56884 (9th Cir. Oct. 19, 2016).  The court reasoned that because the object of a non-judicial foreclosure is to retake and resell the property that secures a debt, as opposed to collecting money from the borrower, the trustee was not acting as a “debt collector” under the statute.  In further support of its conclusion, the court reasoned that holding otherwise would create a conflict between the trustee’s duties under state law and its obligations under the FDCPA.

In reaching this conclusion, the majority expressly rejected the position put forth by the Consumer Financial Protection Bureau (CFPB), as amicus, that all trustees of deeds of trust are “debt collectors” under the FDCPA. Noting that the CFPB has not yet exercised its authority to promulgate a rule interpreting the term “debt collector,” the majority noted that “we accord deference to the agency’s interpretation only to the extent that we find that interpretation persuasive.” Id. at 16 (citing United States v. Mead, 533 U.S. 218, 226-29 (2001)).  Because the court was “unpersuaded by the [CFPB’s] reading of the statute,” it declined to defer to that interpretation.

Although, as the court noted, the CFPB has not issued a rule implementing the FDCPA, the agency has begun the rulemaking process by releasing an outline of proposals it is considering as part of the small business review panel process, which precedes the issuance of a proposed rule.  The CFPB’s outline of proposals does not address the definition of a debt collector or the status of a trustee of a deed of trust.  In light of the Ninth Circuit’s ruling, which conflicts with the views of the Fourth and Sixth Circuits, we may well see this issue addressed in the CFPB’s future rulemaking.