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CAI Overview of the Fair Debt Collection Practices Act

Congress passed the Fair Debt Collection Practices Act (FDCPA) in 1979 to curtail the use of unscrupulous debt collection practices by instilling harsh financial penalties on those creditors choosing not to comply with the Act. Until recently, compliance by community association practitioners has been mostly voluntary, as district courts have routinely ruled that community association assessments do not fall within the FDCPA's definition of debt.
However, on July 2, 1997 the Seventh Circuit Court of Appeals rendered an opinion construing the FDCPA's definition of debt to include community association assessments. Thus, attorneys, management companies and others that collect assessments on behalf of community associations in Illinois, Indiana and Wisconsin are considered debt collectors for purposes of compliance with the Act.

Although a large number of community associations are not under the jurisdiction of the Seventh Circuit, it is evident that the decision will have an impact on community association management companies, and attorneys in other parts of the country. For example, within thirty days of the Seventh Circuit's decision, the San Diego U.S. District Court, relying partially on the decision of the Seventh Circuit, ruled that homeowner assessments are debts under the FDCPA.

To eliminate conflicting interpretations, reduce administrative expense, and protect individuals who collect community association assessments from potential risks and liability as a result of the Seventh Circuit decision, CAI is proposing that the FDCPA be amended so that:

  1. the definition of debt does not include fees, assessments or other charges due or alleged to be due a condominium association, cooperative, homeowners association or other community association;

  2. the term "transaction" is added to the Act and defined to mean an offer or extension of credit made to a consumer for the purpose of acquiring money, property, insurance or services which are primarily for personal, family, or household purposes. Inclusion of the definition will ensure that assessments of community associations are not within the purview of the Act.

Successful changes to the FDCPA will supersede the Seventh Circuit's decision and clarify for all federal courts that the FDCPA's definition of debt was not intended to encompass community association assessments.

For more information on CAI's initiatives concerning the FDCPA, contact CAI's Government & Public Affairs Department by phone, (703) 970-9220, fax (703) 970-9558, or e-mail