LOS ANGELES — Vien-Phuong Thi Ho, a California woman, recently lost her suit against deed holder ReconTrust after alleging the company violated the Fair Debt Collection Practices Act (FDCPA) by engaging in deceptive debt collection processes and misrepresenting the amount she owed on her Long Beach home. 

The panel consisted judges Alex Kozinski, Consuelo M. Callahan and Judge Edward R. Korman, who partially dissented.

The Ninth District Circuit Court panel broke away from the fourth and sixth district court rulings in favor of the plaintiff on May 22, concluding that ReconTrust, as the third-party trustee in this case, is not considered a debt collector and not subject to FDCPA laws because the purpose of its non-judicial foreclosure was simply to recover debt for the lender or lienholder. 

The panel said the difference in this case from similar cases because foreclosure notices from a trustee may induce a debtor to pay the debt, but this does not make the trustee a debt collector.

The panel also said that a fear of having your car impounded due to unpaid parking tickets may make a person inclined to pay those tickets, but it does not then turn the tow truck driver into a debt collector.

Ho purchased her Long Beach home in June 2007 with a loan from defendant Countrywide Bank that was secured by a deed of trust with ReconTrust.

ReconTrust began the non-judicial foreclosure process in 2009 by recording and sending a notice of default that advised Ho that the account was past due for more than $20,000. The notice also said Ho could pay Countrywide to get her account in good standing, and that the home may be sold without courts.

Ho did not pay after receiving the notice. ReconTrust sent the second notice of sale to Ho. This advised Ho that unless she paid, the property would be publicly auctioned.

Ho filed suit in 2009, claiming that ReconTrust threatened foreclosure unless Ho brought her account current. Ho also sought to rescind her mortgage transaction under the Truth in Lending Act. The district court twice dismissed the rescission, which Ho did not repeal. The district court judge held that Ho would need to show a willingness or ability to repay the loan to maintain a rescission claim. Ho did not do so, and dropped the claim.

Callahan, Korman and Kozinski ruled that even though Ho did not replead the rescission, she did not need to allege the ability to repay the loan to state a rescission claim. The court cited that the judge’s words, whether an order or advice, did not give Ho the free will to replead her rescission case, and remanded Ho’s claim for rescission.

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