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Fair Debt Collection Practices

Policy

CAI supports legislation that, in addition to the exempting of community associations from existing provisions of Fair Debt Collection Practices Act (FDCPA), also exempts community association attorneys from the requirements of the Fair Debt Collection Practices Act (FDCPA) and any similar state laws that govern the collection of consumer debts and codifies the determination by the majority of federal court decisions that community managers are not debt collectors.  Further, CAI believes that the state and federal court systems and state licensing requirements already govern the conduct of attorneys and are effective in regulating association attorneys who perform debt collection services.  Regulation under the FDCPA and any similar state laws that govern the collection of consumer debts is duplicative and overly burdensome.  Attorneys are also subject to various state laws that require the notice to certain third parties of the existence of an assessment debt, such as lenders, which violates the literal provisions of the FDCPA, thereby placing community association attorneys in a position of being unable to fully represent the interests of community associations without fear of claims under the FDCPA.

About the Community Association Housing Model

While community associations come in many forms and sizes, all associations share three basic characteristics: (1) membership in the association is mandatory and automatic for all property owners; (2) certain legal documents bind all owners to defined land-use requirements administered by the community association; and (3) all property owners pay mandatory lien-based assessments that fund association operations.

The community association housing model is actively supported by local government as it permits the transfer of many municipal costs to the association and homeowners. Today, many community associations deliver services that once were the exclusive province of local government usually funded by government-levied property taxes.

Community associations are governed by a board of directors or trustees comprised of owners and residents elected by their neighbors. This board guides the association in providing governance and other critical services for the community.

Background

The Fair Debt Collection Practices Act (FDCPA) was enacted in 1977 to deter unscrupulous debt collectors from using harassment techniques to recover debt. The Congressional findings and declarations of the purpose for the FDCPA, as enacted in 1977, are set forth in 15 U.S.C.A. § 1692 as follows:

§ 802. Congressional findings and declarations of purpose

  1. Abusive practices

    There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
     
  2. Inadequacy of laws

    Existing laws and procedures for redressing these injuries are inadequate to protect consumers.
     
  3. Available non-abusive collection methods

    Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.
     
  4. Interstate commerce

    Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.
     
  5. Purposes

    It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to ensure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.

   
Community associations and managers are generally exempt from the requirements of the FDCPA since the law does not apply to the collection of debt by a creditor. In most instances, the collection of assessments by an association attorney is ancillary to the other professional services provided by attorneys to associations. In the overwhelming majority of reported cases in which association attorneys have been found to have violated the requirements of the FDCPA, the violations have been found to be procedural or technical, thereby visiting no actual damages upon the assessment-debtor that were sought to be cured by the FDCPA and state law.

In weighing the cost versus the benefit of subjecting community association attorneys to the requirements of the FDCPA for the collection of assessment debt, the scale weighs heavily in favor of removing the unnecessary increase in the cost of assessment collection borne by the assessment-debtor or the association as the result of the FDCPA and state laws, which is then passed on to the unit owners who otherwise are current in their payment of assessments.

Inasmuch as the collection of assessments due to community associations is commonly unopposed by the debtor and, by state law or the terms of an association's governing documents is added to the amount due from the debtor, the additional requirements imposed for association assessment debt by the FDCPA and similar state laws causes a material increase in the amount due from the assessment-debtor thereby making the ability of the debtor to pay the debt more onerous.

Community associations rely on the collection of assessments to effectively preserve, repair, or maintain the property owned by the owners in common.  Delay in the ability to collect assessments has a significant negative impact on the ability of an association to undertake the maintenance, repair and replacement work that is essential to maintaining a safe and attractive community. The failure of one or more owners to pay an assessment creates a debt to other owners and places an unjustified financial strain on other owners.  Local governments throughout the United States have increasingly shifted the burden of maintaining improvements that were historically maintained by local government to community associations.  As a result, making the collection of assessments more burdensome may also result in an association's inability to maintain improvements that are vital to the community and for emergency services.

Accordingly, community association assessments are now more akin to local governmental taxes rather than consumer debt.  Taxes are not considered “consumer debt" under the FDCPA.  Common expense assessments serve the same function as taxes due local governments.  Association assessments represent the financial obligation borne by the community as a whole for services that benefit the general welfare of all owners, including snow plowing of streets, maintaining storm water management systems, fire hydrants, utilities, sidewalk repairs, recreational facilities, and the like, as do governmental entities.

Recommendation

CAI recommends that owners become educated as to their responsibilities, if any, to the FDCPA and state law, as it evolves and as it is interpreted in the case law in various jurisdictions and comply with the same. CAI opposes duplicative legislation at the state level that imposes state penalties for violations that are already incorporated within the FDCPA. CAI supports legislation that accomplishes any of the following:

  1. The exemption of association attorneys and community managers from the FDCPA or any similar state laws that impose unduly burdensome requirements in collecting monies owed to community associations.

  2. The elimination of penalties and attorneys' fees for technical or procedural violations that cause no damages to a debtor. 

  3. The elimination of community association assessments as “consumer debt" under the FDCPA or any similar state laws.

Although courts have interpreted the language of the FDCPA to include assessment debt as consumer debt, CAI urges its members to educate legislators on a continuing basis concerning the similarity of assessment debt to local governmental taxes and ultimately seek the statutory removal of association assessments as consumer debt under all relevant consumer debt protection laws.

Policy History

Approved by the Public Policy Committee, April 22, 1998

Approved by the Public Affairs Council, April 22, 1998

Adopted by the Board of Trustees, April 25, 1998

Amended and Approved by the Government & Public Affairs Committee, October 17, 2001

Adopted by the Board of Trustees, May 3, 2002

Amended and Approved by the Government & Public Affairs Committee, December 13, 2011

Adopted by the Board of Trustees, January 26, 2012

Amended and Approved by the Government & Public Affairs Committee April 23, 2019

Adopted by the Board of Trustees, May 15, 2019

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