Court of Appeal (Cal.) Holds that Persons Engaging Only in Activities Leading Toward a Foreclosure Sale Are Not “Debt Collectors” Under FDCPA

In Fonteno v. Wells Fargo Bank, N.A., — Cal.Rptr.3d —-, 2014 WL 4058867 (Cal.App. 1 Dist. 2014), the California Court of Appeal held that a person engaging only in activities leading towards a foreclosure sale is not a “debt collector” under the FDCPA.

Plaintiffs’ “debt collector” contentions rest on their theory that “First American’s principal business IS debt collection by processing non-judicial trustee sales.” (Italics added.) They contend all of the appellate authority since Pfeifer supports this theory, in effect arguing that we reached the wrong conclusion in Pfeifer, as did the trial court below. ¶ Plaintiffs fail to provide persuasive authority for their argument. They cite two cases in their opening brief. In the first, Schlegel v. Wells Fargo Bank (9th Cir.2013) 720 F.3d 1204 (Schlegel ), the Ninth Circuit concluded that the Schlegels, defaulting borrowers, did not make allegations sufficient to establish that their lender, Wells Fargo, qualified as a debt collector under the FDCPA. ( Id. at pp. 1208–1210.) Even if they had, the court’s discussion of the Schlegels’ complaint indicates they alleged Wells Fargo made repeated demands for loan payments as well as initiated foreclosure proceedings. ( Id. at pp. 1206–1207.) Plaintiffs do not contend First American took such actions. Therefore, Schlegel does not afford plaintiffs legal support and is inapposite. ¶ Plaintiffs also cite Glazer v. Chase Home Finance LLC (6th Cir.2013) 704 F.3d 453 (Glazer ). The Glazer court held that “mortgage foreclosure is debt collection under the FDCPA.” ( Id. at p. 461.) However, the Glazer court’s analysis in support of this conclusion is not novel. To the contrary, the court relied heavily on two cases that were issued prior to Pfeifer, Wilson v. Draper & Goldberg, P.L.L.C. (4th Cir.2006) 443 F.3d 373 (Wilson ) and Piper v. Portnoff Law Associates, Ltd. (3d Cir.2005) 396 F.3d 227. In our discussion in Pfeifer, we indicated that we considered, and rejected, the Wilson court’s conclusion. ( Pfeifer, supra, 211 Cal.App.4th at p. 1263, fn. 4.) Instead, we agreed with the conclusion reached in the majority of other federal district court cases, such as Hulse v. Ocwen Federal Bank, FSB (D.Or.2002) 195 F.Supp.2d 1188. (Pfeifer, at p. 1263, fn. 4.) The Glazer court both acknowledged Hulse (with which it disagreed) and that the majority of federal district courts have held that mortgage foreclosure is not debt collection. ( Glazer, supra, 704 F.3d at p. 460.) We are not required to follow Glazer. ( Barrett v. Rosenthal (2006) 40 Cal.4th 33, 58 [noting that “[w]here lower federal precedents are divided or lacking, state courts must necessarily make an independent determination of federal law’ “].) Its analysis does not give us cause to rethink our conclusion in Pfeifer. ¶ In their reply brief, plaintiffs argue Pfeifer is distinguishable from their allegations because we did not consider in that case whether such persons could also be liable for engaging in unfair, or deceptive debt collection practices prohibited by sections 1692e and 1692f of title 15 of the United States Code, which are also part of the FDCPA. However, although plaintiffs alleged First American violated section 1692f(6) (but not section 1692e), they defined these purported violations as actions taken regarding foreclosure. There-fore, this argument is unpersuasive as well. ¶ Plaintiffs also contend First American was acting as a debt collector based on the notice of default it sent them as agent for beneficiary Wells Fargo. According to plaintiffs, First American stated in the notice that it “was acting as a Debt Collector attempting to collect a debt” in capital letters and boldface type. Plaintiffs argue this notice was similar to that found to be a basis for a “debt collector” finding in Reese v. Ellis Painter Ratterree & Adams (11th Cir.2012) 678 F.3d 1211 (Reese ), which we also discussed in Pfeifer. ¶ We disagree. As we discussed in Pfeifer, the Reese court considered documents that stated the law firm in question “ ‘ “IS ATTEMPTING TO COLLECT A DEBT” ‘ “ and that “ ‘ “THIS LAW FIRM IS ACTING AS A DEBT COLLECTOR ATTEMPTING TO COLLECT A DEBT.” ‘ “ ( Pfeifer, supra, 211 Cal.App.4th at p. 1263, fn. 4, quoting Reese, supra, 678 F.3d at p. 1217.) The pertinent statement in First American’s notice of default to plaintiffs states, in capital letters and boldface type, that First American, as agent for the beneficiary, “may be acting as a debt collector attempting to collect a debt. Any information obtained may be used for that purpose.” (Italics added.) The difference between the two statements is critical. The latter statement only contemplates the possibility that First American was acting as a debt collector, not that it was doing so. Again, plaintiffs do not contend First American did anything other than seek to foreclose on the property. We conclude this notice statement alone does not convert First American into a debt collector under the FDCPA. ¶ Plaintiffs also assert First American was acting as a debt collector because it sent this notice before substituting in as the trustee, and lacked the authority to record a valid notice of default. This too is unpersuasive in light of plaintiffs’ failure to point to any debt collection activity, regardless of whether First American was authorized to send this notice, a question contested between the parties. ¶ In short, we conclude the trial court properly sustained without leave to amend defendants’ demurrer to plaintiffs’ FDCPA cause of action. In light of this conclusion, we do not address plaintiffs’ argument that their deed of trust incorporated the requirement that defendants comply with the FDCPA or defendants’ argument that plaintiffs cannot, as private parties, seek equitable relief pursuant to the FDCPA.