If you work for an HOA, serve on its Board of Directors, or own a property covered by one, there are a few things you should know about debt collection practices. So, to help you develop a greater understanding of HOA Fair Debt Collection Practices, we put together a few tips. Read on for the most useful tips you may get this year.
Fair Debt Collection Practices Act. Congress passed the Fair Debt Collection Practices Act (FDCPA, or the Act) in 1979 to keep creditors from using abusive, unfair, deceptive, or harassment practices to collect consumer debt. To be clear, Congress did not pass the Act specifically to deal with Association practices; however, the Act considers Homeowner Association assessments (HOA fees) consumer debt. The Act considers attorneys and collection companies who collect HOA fees and other debts on behalf of the Association as third-party debt collectors who must comply with the FDCPA. Management companies are agents of the HOA and, therefore, debt collection by the management company is like debt collection by the HOA for itself. Unless the particular jurisdiction where the Association resides mandates compliance with FDCPA, the Act exempts management companies from its proscriptions.
What does the Act provide? FDCPA restricts the methods by which debt collectors can contact debtors, including the times of day and the number of contacts. A debtor can sue a debt collector who violates the provisions of the FDCPA to collect money damages as well as attorney fees within one year of the violation. Even if the debtor cannot prove actual damages, the Court can impose a $1,000 judgement against the debt collector.
The Act does not apply to collection of personal debts by the person to whom the debtor owes the money, only to third-party debt collectors and collection agencies.
What are some of the rules under FDCPA? Debt collectors cannot call consumers before 8am or after 9pm, unless the consumer requested a call during those hours. Debt collectors can try to reach debtors at home or at their place of employment. However, if the debtor tells the collection agency to stop calling him at work, the calls must stop. If a debtor wants the calls to stop at home, he must put the request in writing.
Can debt collectors call friends and relatives of the debtor? Yes, in certain circumstances. If the debt collector does not have contact information for the debtor, he may try to get the information by contacting relatives, neighbors, or other associates. He can only call each of them one time and he must not reveal any particulars about the debt or that he calls on behalf of a debt collection agency.
It sounds like the FDCPA tied the hands of debt collectors. What can they legally do under the law? Basically, the law limits debt collectors to calling the debtor and requesting payment. If the debtor is amenable, they can sometimes set up a payment plan or a settle the account. They cannot harass or threaten to harm the debtor or threaten him with imprisonment. They cannot threaten to sue the debtor unless they actually intend to take action in court.
I've heard the term "Zombie Debt" bandied about. What does it mean in relation to FDCPA?
Zombie Debt refers to debts that were already paid or that never existed in the first place. If a debt collector harasses a consumer about Zombie Debt, the FDCPA allows the consumer to write to the debt collector to tell him to stop. After the debt collector receives such a letter, he can only contact the consumer again to tell him he will cease the collection effort or that he will take a specific action on the debt.
If a debt collector violates the Act, to whom do consumers complain? Consumers should report any problem with a debt collector to their state Attorney General, The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau.
Remember the FDCPA is not about eliminating a debt that truly owed. It's about eliminating the stress that unfair collection practices cause. It's a very consumer friendly law.
For more useful information on running your HOA, contact us to speak with one of our community experts.