Trustees Are Not Debt Collectors In Nevada

Christopher L. Benner, Esq.

By Christopher L. Benner, Esq., & Robin Prema Wright, Esq., Wright Finlay & Zak

In an appeal from a state administrative ruling, a Nevada state district court recently ruled that the Nevada Financial Institutions Division (FID) erred in characterizing a trustee’s exercising of a power of sale in the course of a non-judicial foreclosure as an effort to collect a debt requiring the trustee to be licensed and supervised by the FID.

In 2010, the FID responded to a complaint against Quality Loan Service Corp. (“Quality”) for acting as a collection agency without a license.  Although the borrower had defaulted on the loan, , the complaint alleged that Quality’s noticing and conducting a foreclosure sale constituted debt collection efforts.The FID issued a Cease and Desist Order and Quality appealed to the Commissioner of the FID. The Commissioner concluded that that a Trustee exercising the power of sale in compliance with NRS Chapter 107 was soliciting the payment of a claim, and thus required a debt collection license.  Quality appealed the decision to the state district court.

The matter was fully briefed by the parties, with Wright, Finlay & Zak contributing an amicus brief on the UTA’s behalf, highlighting the impact of the FID decision on the industry and economy.  After an extensive hearing on the matter, the Court concluded that exercising the power of sale was not debt collection, thus trustees were not debt collectors and no license was required. The Court lifted the Cease and Desist Order, finding the FID did not have authority to regulate or oversee trustees, and only state courts oversaw the foreclosure process.

While Trustees might still need to respond to the legion of wrongful foreclosure claims by borrowers and adjust to the unending changes to NRS Chapter 107, including those imposed by AB 284, Trustees will not be subject to the oversight and whim of the FID.