Residential Credit Solutions, Inc. instituted mortgage foreclosure proceedings against the married homeowner defendants Tatyana Pendyuk and Ihor Khatkovyy. The mortgagee named in the foreclosure complaint was Mortgage Electronic Registration Systems, Inc. (MERS) as Nominee for BankUnited FSB. BankUnited was named as the lender on the mortgage and note. The complaint also stated, however, that Residential Credit was the mortgagee under an Illinois statute that includes in its definition of a mortgagee one who is designated or authorized to act on behalf of the holder of indebtedness secured by a note. The property was eventually sold at auction, and the court confirmed the sale.
The borrowers moved to vacate the order, arguing that Residential Credit was a debt collector that had failed to register as such as required under the Illinois Collection Agency Act.77 As a result, the borrowers sought to invalidate the foreclosure judgment. Residential Credit asserted that it (1) was a mortgage servicer, (2) had started servicing the mortgage before it became delinquent, and (3) was not a debt collector under the Illinois Collection Agency Act because the act excludes collection activities directly related to a business other than debt collection, including banking. According to the appellate court, "a debt collector is an entity whose primary business is debt collection." Does Residential Credit fit within this definition? What activities could a mortgage servicer perform that would take it out of this definition? The Federal Fair Debt Collection Practices Act78 "carves out an express exception" from its definition of a debt collector for a person collecting or attempting to collect a debt if the activity concerns a debt that was not in default at the time it was obtained by that person. How will the language of the federal statute affect the court's order?