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Financial Services Law Insights and Observations

9th Circuit reverses ruling in FDCPA case

Courts Ninth Circuit FDCPA Appellate


On June 8, the U.S. Court of Appeals for the Ninth Circuit overturned a district court’s finding that an obligation for a rental property cannot be “primarily consumer in nature” under the FDCPA. The plaintiff and his wife purchased two properties in the same community in Arizona. The plaintiff and his wife claimed that they initially purchased the first property as a retirement home and only decided to use it as a rental property later. The plaintiff also claimed that he and his wife purchased the two properties with the intent of having tenants occupy them until they moved into one of them upon retirement. The defendant homeowner’s association sued the plaintiff in state court for allegedly failing to pay assessments and late fees associated with one of the properties. The plaintiff sued the defendant in federal court, alleging the attempts to collect the money violated the FDCPA. The district court granted summary judgment in favor of the defendant concluding that, “because there is no genuine dispute that the [first property] was a rental property, the obligation associated with the property is commercial, not consumer, in nature.” Consequently, because the obligation was not consumer in nature, the district court determined that it does not qualify as a “debt” subject to the FDCPA.

On appeal, the 9th Circuit reversed the entry of judgment for the defendant and remanded to the district court with instructions that the court, “make a factual determination of the true purpose of the [plaintiff’s] acquisition of [both properties].” The 9th Circuit also noted that, “to determine whether the transaction was primarily consumer or commercial in nature, the court must ‘examine the transaction as a whole, paying particular attention to the purpose for which the credit was extended.’”

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