Vien-Phuong Ho v. ReconTrust Company, N.A., et a | 9th Cir. Holds Foreclosure Trustee Not FDCPA ‘Debt Collector’

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

VIEN-PHUONG THI HO, Plaintiff-Appellant, v. RECONTRUST COMPANY, NA, subsidiaries of Bank of America, N.A.; COUNTRYWIDE HOME LOANS INC; BANK OF AMERICA, N.A., Defendants-Appellees. SUMMARY** Fair Debt Collection Practices Act Affirming in part and vacating in part the district court’s dismissal of an action for failure to state a claim, the panel held that the trustee of a California deed of trust securing a real estate loan was not a “debt collector” under the Fair Debt Collection Practices Act. Seeking damages under the FDCPA, the plaintiff alleged that the trustee of the deed of trust on her property sent her a notice of default and a notice of sale that misrepresented the amount of debt she owed. The plaintiff also sought to rescind her mortgage transaction under the Truth in Lending Act. Disagreeing with the Fourth and Sixth Circuits, and agreeing with the California Courts of Appeal, the panel held that the trustee was not a “debt collector” subject to damages under the FDCPA because the trustee was not attempting to collect money from the plaintiff. The panel held that the object of a non-judicial foreclosure in California is to retake and resell the security on the loan. Thus, actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect “debt” as that term is defined by the FDCPA. The panel wrote that following a trustee’s sale, the trustee collects money from the home’s purchaser, not the original borrower. Because the money collected from a trustee’s sale is not money owed by a consumer, it is not “debt.” Accordingly, the foreclosure notices were an enforcement of a security interest, rather than general debt collection under 15 U.S.C. § 1692a(6). Citing Sheriff v. Gillie, 136 S. Ct. 1594 (2016), the panel declined to create a conflict with state foreclosure law in its interpretation of the ambiguous term “debt collector.” Accordingly, the panel affirmed the dismissal of the FDCPA claim. The panel held that even though the district court twice dismissed the plaintiff’s TILA rescission claim and she did not replead it in her third complaint, it was preserved for appeal because the district court instructed her that she would be required to allege the ability to repay the loan in order to state a rescission claim. The panel held that under Merritt v. Countrywide Fin. Corp., 759 F.3d 1023 (9th Cir. 2014), decided after the district court’s dismissal, a mortgagor need not allege the ability to repay in order to state a rescission claim. Accordingly, the panel vacated the dismissal of the TILA claim and remanded for consideration of the claim in light of Merritt. LINK TO OPINION BELOW: