Supreme Court Debates Meaning of ‘Debt Collector’ in Foreclosure Protections Case

Updated 3/20/19: HousingWire published an article outlining a Supreme Court ruling that has awarded mortgage lenders and servicers additional protection when serving non-judicial foreclosures.

Article (Supreme Court Makes it Harder for Borrowers to Fight Foreclosures in Non-Judicial States)

Supreme Court Decision (OBDUSKEY v. MCCARTHY & HOLTHUS LLP)

Updated 3/20/19: DS News published an article discussing the Supreme Court decision for the case of Obduskey v. McCarthy & Holthus LLP.

Article (McCarthy & Holthus Responds to Supreme Court Foreclosure Ruling)

Industry Update

January 7, 2019

Source: CNBC

WASHINGTON – Markets are racked by turmoil, and there are signs the booming U.S. economy could slow down later this year. Yet the Supreme Court is reckoning with the lingering fallout from the financial crisis that rocked the global economy a decade ago.

The top court on Monday attempted to resolve a legal question that could have broad ramifications on hundreds of thousands of Americans who are foreclosed on without a judicial process each year. A key issue in the matter is who or what can be considered a “debt collector.”

The justices were divided, but not into clear ideological zones. Chief Justice John Roberts and Justice Brett Kavanaugh, Republican-appointed conservatives who are typically business friendly, were among the most skeptical questioners of the respondent in the case, a law firm working on behalf of Wells Fargo.

To be sure, there are ideological divides at issue. Sen. Elizabeth Warren, D-Mass., who announced a formal step toward a bid for the presidency last month, took a public stance on behalf of the petitioner in the case.

Warren, alongside potential 2020 contender Sen. Sherrod Brown, D-Ohio; Rep. Maxine Waters, D-Calif.; and a slate of other liberal lawmakers, filed a brief outlining what they believed was Congress’s intent in drafting the law at issue.

On the other side was the Trump administration, which dispatched the solicitor general, as well as powerful business interests including the Chamber of Commerce and associations representing bankers.

The case centers on Dennis Obduskey, a Colorado man who defaulted on his $329,940 home loan in the aftermath of the 2007 financial crisis. The question in the case is whether Obduskey is entitled to legal protections for debtors provided by Congress in 1977, or whether the foreclosure is exempt because it is Obduskey’s home, and not money, that is at stake.

Obduskey obtained his home loan from a company called the Magnus Financial Corporation in 2007. Like many other Americans, he defaulted on the loan in 2009.

The bank then attempted to foreclose on Obduskey for six years, to no avail. Finally, in 2015, Wells Fargo retained a law firm — McCarthy & Holthus — to handle the foreclosure proceedings. But, as of the latest briefs in the case, Obduskey’s home has yet to be sold.

The question of whether a law firm seeking to foreclose on a property is a debt collector is one that could affect millions of Americans. In 2016, about 200,000 homes were lost to foreclosure in states that permit lenders to foreclose on a property without going to court. Business groups have argued that these so-called non-judicial foreclosures are more efficient and fair to borrowers. Progressives say borrowers are entitled to more protections.

Obduskey’s attorney, Daniel Geyser, argued that McCarthy & Holthus is a debt collector and therefore required to comply with certain procedural protections contained in the 1977 Fair Debt Collection Practices Act. That law was passed to prevent debt collectors from engaging in abusive or predatory practices.

But Kannok Shanmugam, the attorney for the respondent in the case, argued that the FDCPA does not apply because, he said, the firm is not a debt collector. Shanmugam argued that Congress has long made a distinction between those collecting debts and those who seek to enforce security interests, or collect property that is owed without demanding payment.

The court is expected to issue a ruling by late June.

Justices look split

The semantic fight seemed split the justices into unusual camps, with Roberts at one point remarking to Shanmugam that the law is “not the way you would have told Congress how to write the statute.” Neither was it the way “your friend on the other side” would want Congress to write it, he added, referring to Geyser.

Kavanaugh suggested that he believed the firm was a debt collector. The purpose of a foreclosure, he said, is telling somebody “you need to pay or you’ll lose your house.”

Roberts added that “it certainly is an indirect effort to collect the debt,” which led Shanmugan to concede that Roberts’ point “makes it harder for me,” before he pointed to what he said was a longstanding distinction between debt collectors and those seeking to enforce security interests. It would not make any sense for Congress to distinguish between the two groups if someone enforcing a security interest is a debt collector, he said.

Importantly, the meaning of “debt collector” under the law does not necessarily have to hew to what it means in common speech. Indeed, McCarthy & Holthus itself sent Obduskey a notice identifying itself as a debt collector and requesting payment, which a federal appeals court said was not enough to invoke the FDCPA.

In order to establish what the law meant by “debt collector,” the justices sparred with counsel for much of the argument over the similarities between a law firm seeking to foreclose on a property and a repossession agent, or repo man, who arrives in the “dead of night.”

While a repossession agent might traditionally be considered a debt collector, Geyser argued that in fact Congress meant to distinguish the category.

Repossession agents do not demand payment – they are paid for collecting the property – and therefore would be exempt from some portions of the law, Geyser argued. That is why, he said, Congress made the distinction. But Shanmugam argued that it would not make sense for Congress to have exempted such a narrow category from the law.

Justice Samuel Alito seemed the most receptive to that argument, telling Geyser that Congress’s apparent exception of those enforcing a security interest from the definition of “debt collector” gave Geyser a “tough time.”

Justice Elena Kagan noted that “the grammar of the statute” suggests that the law firm can either be a debt collector, or it can be seeking to enforce a security interest, but not both. Because the firm is “paradigmatic” as a collector of a security interest, it is “a little less odd” to say they are not a debt collector.

Justice Sonia Sotomayor, however, appeared to agree with Geyser’s argument that the firm could be both, and noted that “what’s really at issue is the unfair practices.”

The justices were missing Ruth Bader Ginsburg, who did not attend oral arguments for the first time in more than 25 years on the bench.

The federal appeals courts are divided on the issue. At least two federal appeals courts have reasoned that “debt is synonymous with money” and so the FDCPA therefore would not apply to a law firm that is seeking to collect property.

The district court dismissed Obduskey’s complaint on those grounds, and that decision was ultimately affirmed by the U.S. 10th Circuit Court of Appeals.

At least three other federal circuits have staked out a different interpretation of the law. For instance, the 6th U.S. Circuit Court of Appeals has held that every mortgage foreclosure is undertaken “for the very purpose of obtaining payment on the underlying debt.”

The court, in the 2013 case Glazer v. Chase Home Finance, held that there “can be no serious doubt that the ultimate purpose of foreclosure is the payment of money.”

In a brief, an array of business groups including the Chamber of Commerce and the Mortgage Bankers Association wrote that applying the FDCPA protections to the foreclosure process would add “an additional, unwarranted layer of complexity in the foreclosure process, thereby harming both lenders and borrowers.”

It was not clear on Monday which side would be able to secure the five votes necessary to win. Making any inferences harder was the absence of Ginsburg, who is expected to vote in the case but who was not able to ask any questions of counsel.



Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.


Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.



Sean Reddington

Sean Reddington is the new Chief Information Officer for Safeguard Properties LLC. Sean has over 15+ years of experience in Information Services Management with a strong focus on Product and Application Management. Sean is responsible for Safeguard’s technological direction, including planning, implementation and maintaining all operational systems

Sean has a proven record of accomplishment for increasing operational efficiencies, improving customer service levels, and implementing and maintaining IT initiatives to support successful business processes.  He has provided the vision and dedicated leadership for key technologies for Fortune 100 companies, and nationally recognized consulting firms including enterprise system architecture, security, desktop and database management systems. Sean possesses strong functional and system knowledge of information security, systems and software, contracts management, budgeting, human resources and legal and related regulatory compliance.

Sean joined Safeguard Properties LLC from RenPSG Inc. which is a nationally leading Philintropic Software Platform in the Fintech space. He oversaw the organization’s technological direction including planning, implementing and maintaining the best practices that align with all corporate functions. He also provided day-to-day technology operations, enterprise security, information risk and vulnerability management, audit and compliance, security awareness and training.

Prior to RenPSG, Sean worked for DMI Consulting as a Client Success Director where he guided the delivery in a multibillion-dollar Fortune 500 enterprise client account. He was responsible for all project deliveries in terms of quality, budget and timeliness and led the team to coordinate development and definition of project scope and limitations. Sean also worked for KPMG Consulting in their Microsoft Practice and Technicolor’s Ebusiness Division where he had responsibility for application development, maintenance, and support.

Sean is a graduate of Rutgers University with a Bachelor of Arts and received his Masters in International Business from Central Michigan University. He was also a commissioned officer in the United States Air Force prior to his career in the business world.


General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.


Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.


AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.


AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.


AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.


AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.


AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.


Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.