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Court Of Appeal Finds Mortgage Servicer To Be A Debt Collector

Rosenthal Fair Debt collection Practices Act defines a "debt collector" as "any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engaged in debt collection".  Cal. Civ. Code § 1788.2(c).  "Debt collection" under the Rosenthal act means "any act or practice in connection with the collection of consumer debt".  Cal. Civ. Code § 1788.2(b) ("consumer debt" is defined in § 1788.2(f)).  The Rosenthal Act doesn't say whether it applies to persons attempting to collect mortgage debt and the federal courts have split on the question.  

Yesterday, the California Court of Appeal held that the Rosenthal Act's definition does apply to a mortgage servicer that engages in debt collection practices in attempting to obtain repayment of mortgage debt.  Davidson v. Seterus, Inc., 2018 Cal. App. LEXIS 202.  The case is likely to be of concern for consumer mortgage servicers that may now find themselves to be the target of plaintiffs alleging violations of the many "thou shalt nots" written into the Rosenthal Act.

Parent companies may also be dismayed by the Court of Appeal's holding that the plaintiff had stated a cause of action against the defendant's parent corporation for violations of the Rosenthal Act merely by alleging generally that the parent and subsidiary acted as agents for each other and that they aided and abetted each other.  

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...