Hi everyone – I hope you have had a nice summer.
I spoke yesterday to a group of attorneys for “continuing education” credit – my topic was HOA collections. Even though I’ve addressed this in the past, I wanted to get a “summer blog” entry to you and thought I would use my outline from yesterday.
Please see the following and note that our firm has an exciting lineup of topics for the rest of the year – and you will be seeing my entries much more frequently.
Finally, for those of you in Salt Lake, I am holding HOA UNIVERSITY this Saturday at 9 am to 10 am. Light refreshments served; not cost; but please RSVP if interested by calling 801-274-6800 or emailing Jana at: email@example.com
TOPIC: DO I REALLY HAVE TO FOLLOW MY GOVERNING DOCUMENTS?
COME SEE OUR NEW OFFICES:
4141 So. Highland Drive, Suite 225
SLC, UT 84124
LET’S GET TO IT: FAIR DEBT COLLECTION
The following are some important considerations to avoid a Fair Debt Collection Act claim when dealing with HOA assessments and FINES. Please give this a quick read – I look forward to talking/seeing most of you in the near future as your needs come up. For Boards collecting its own debt, the Act may not strictly apply, but PLEASE be cautious of the “triggers of liability” below.
Thanks in advance – John
Whom the Fair Debt Collection Practices Act (the “Act” or “FDCPA”) Covers
1. The FDCPA protects debtors from being harassed by creditors.
2. If creditors violate the act, consumers can sue them for damages—even if the consumer actually owes the debt.
3. The act applies only to consumer debt, like credit card debt; it doesn’t cover business debts.
4. The Act restricts the activities only of third parties collecting debt on behalf of another entity.
5. It’s an important consumer protection statute that does apply to the collection of HOA assessments BUT it typically doesn’t apply to homeowners associations attempting to collect a debt themselves.
6. Management companies typically are not subject to the Act, BUT THIS IS NOT CONCLUSIVE.
There are cases out there that conclude that management companies aren’t debt collectors but debt servicers. A debt collector is someone who collects debt when it’s past due. A debt servicer collects debt whether it’s past due or not.
7. BUT – beware to HOA attorneys – the Act applies.
Actions that Trigger Damages
The FDCPA allows consumers to recover damages if they can prove a debt collector has violated the act.
It’s a violation of the FDCPA for a debt collector to:
• Lie or mislead debtors
• Yell, shout, swear, name-call, use racial slurs, or threaten violence against debtors
• Contact debtors’ friends, family, co-workers, or neighbors and tell them the debtors owe a debt or to call debtors at work after they’ve asked the collectors to stop
• Make threats to sue debtors or garnish their wages or claim they can be arrested or jailed for failing to pay
• Directly contact debtors who are represented by a lawyer
• Call debtors over and over and over and over (do not call before 8 am or after 9 pm)
• And then there’s the catchall, which is to do anything else that could be defined as unfair, undignified, or disrespectful
What HOAs Should Know
Whether the FDCPA applies to your HOA’s collection of overdue assessments, your management company’s collection of delinquent accounts, or your lawyer’s collection of assessments/unpaid fines, your HOA client could step into trouble. If it does, the outlook isn’t favorable for the HOA.
Be very careful about:
1. How you handle liens and foreclosures;
2. If you’re going to discuss OUTSTANDING ACCOUNTS in an open meeting, attach a code to the account so you’re not referring to an address or owner’s name. The biggest thing we tell our clients to be careful of is not to make it public that somebody is delinquent.
3. Utah’s lien filing requirements: (1) Are the CCRs a lien? (2) Is a separate lien needed? (3) What is this Utah Department of Commerce HOA Registration issue? (4) Can you lien up unpaid HOA fines?
PLEASE GET AHOLD OF OUR OFFICE IF YOU DO NOT KNOW WHAT THE UTAH HOA REGISTRY IS? IF YOU ARE NOT REGISTERED OR IT IS NOT UP-TO-DATE – you may not have lien rights!!!!!!
Board Member Advice:
SIMPLE TIP: Board members need to understand that the Act strongly favors debtors, not associations. So it’s very easy to get yourself in trouble when you have outsourced your collections.
Attorney and Management Company Advice:
Debtors can sometimes turn the table on a law firm, an association, or a management company—or all of the above—because they feel they haven’t been treated in accordance with the FDCPA’s provisions (whether rightly or wrongly – if they perceive unfair treatment, a claim may follow).
Recently Heard Comment from an Attorney Friend:
“I’ve had a couple claims, and they’ve all been shakedowns (for the most part). They’ve all been frivolous, but there’s no reason to fight them because it’s so easy for consumers to win them. It’s just an extremely debtor-friendly law, and there’s really no good reason for an association to test it.”
RICHARDS – My take: I don’t know if I’d go so far to say all the claims are frivolous, but the point is be careful, be sensitive, know the law. You are not alone in this and surround yourself with a professional team.
WE ARE READY TO HELP WITH ALL OF YOUR HOA NEEDS. Please feel free to forward any topics you may want to see analyzed.