Debt-Collection Dispute Gets U.S. Supreme Court Review

(Bloomberg) -- The U.S. Supreme Court agreed to decide whether thousands of borrowers can invoke a federal debt-collection law when they are facing foreclosure.

The justices said they will hear an appeal from a Colorado man who defaulted on a $330,000 home loan in 2009 and is now battling a law firm that sought foreclosure on behalf of lender Wells Fargo & Co.

The issue is whether the Fair Debt Collection Practices Act, which protects borrowers, applies in foreclosure proceedings that take place outside the court system. Lower courts are divided on the question.

The action was on a list of orders the court released Thursday in wrapping up its nine-month term.

The debt dispute could have important implications for the tens of thousands of foreclosures that are initiated every month. In 2016 alone, almost 400,000 homes were subjected to foreclosure, about half through non-court proceedings.

The borrower, Dennis Obduskey, invoked a provision in the federal law that requires collectors to confirm the validity of a debt and provide documentation.

The case is Obduskey v. McCarthy & Holthus, 17-1307.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, Justin Blum

©2018 Bloomberg L.P.