HOA Collections Under The Fair Debt Collections Practices Act (FDCPA)

By: Christopher R. Moore, Esq.

The FDCPA regulates “debt collectors” who regularly attempt to collect debts owed to third parties by consumers.  15 U.S.C. §1692a(6).  The law requires certain notices to debtors, prohibits certain forms of communications, and generally bans harassment or abusive conduct by debt collectors toward consumers.  15 U.S.C. §1692b and c

HOA fees are considered “debts” under the FDCPA. Ladick v. Van Gemert, 146 F. 3d 1205 (10th Cir.1998). And a member of a homeowners association who owes a debt to the association is considered a “consumer” protected by the FDCPA.  Thies v. Law Offices of William A. Wyman, 969 F. Supp. 604 (S.D. Cal. 1997).  However, as long as the association is attempting to collect the debt on its own behalf, it will not qualify as a “debt collector” and therefore not be regulated by the FDCPA. 

Where the FDCPA kicks in is when the HOA turns unpaid assessments over to an attorney’s office or debt collector for collection, including lien-filing if intended to result in payment from the member.  If a law firm attempts to collect debts as a regular part of its practice, the firm is a “debt collector” under the FDCPA.  See Fuller v. Becker and Poliakoff, 192 F. Supp. 2d 1361 (M.D. Fla. 2002).  Thus, the firm has to comply with all FDCPA provisions governing debt collection.

As a regulated debt collector, an attorney hired by an HOA is limited by the FDCPA in the actions he or she can take on the association’s behalf.  Along with the prohibitions against harassment and misrepresentations, “debt collectors” are also required to make specified disclosures, prohibited from collecting fees not expressly allowed by agreement or law, and limited in how they can communicate with third parties about the debt.  See 15 U.S.C. §1692d-f.      

Whether real estate management companies working for associations are regulated by the FDCPA is something of a gray area.  The statute’s application comes down to the “principal purpose” of the company.  If a management company spends most of its time and effort on collecting unpaid assessments, it is probably a “debt collector” under the FDCPA.  But if its primary focus is on managing association facilities - and collecting delinquent assessments is only an incidental part of its duties - then it is probably not governed by the FDCPA.  See e.g., Alexander v. Omega Management, Inc., 67 F. Supp. 2d 1052 (D.Minn 1999); Franceschi v. Mautner-Glick Corp., 22 F. Supp. 2d 250 (S.D.N.Y. 1998).