In September, a number of homeowners associations began reporting monthly assessment payments to a credit bureau. Such a standard financial management tool is normal for creditors, landlords, and mortgage companies, but is new to common-interest communities. It is a practice that could promote a major positive shift in how boards manage their associations.
The reporting of the information was facilitated by Sperlonga Data and Analytics, a data aggregation company that recently started helping associations report assessment payments to Equifax.
No added liability. Information reported to credit bureaus is subject to the Fair Credit Reporting Act. The law requires that furnishers of information to credit bureaus not report information if they know it is inaccurate or have a good reason to believe it is inaccurate. But if there are mistakes in the information they report, there is no private cause of action under FCRA. There is an exemption in FCRA from furnisher liability to consumers if the information is inaccurate. If there are systemic problems that cause the errors, the regulators can investigate, but as part of its service, Sperlonga assists in avoiding systemic problems. Under FCRA, furnisher liability to consumers can only arise if consumer disputes are not properly investigated.
In addition, the Fair Debt Collection Practices Act doesn't apply to associations, and reporting information to a consumer reporting agency won't make it apply. For example, Chase, Citibank, Capital One, landlords, cell phone companies, and utilities report information to the credit bureaus, but that doesn't make them collection agencies. They are creditors and furnishers to consumer reporting agencies. Similarly, associations won't suddenly be collection agencies if they report information.
It is well-settled law that FDCPA applies only to debt collectors, not entities to whom money is owed. FDCPA applies to "debts," which is defined as "any obligation of a consumer to pay money … which (is) the subject of a transaction (used) primarily for personal, family, or household purposes." Association obligations are personal debts as defined by the law. But FDCPA only applies to "debt collectors," which is defined as "any person … in any business the principal purpose of which is the collection of debts owed or due … another." The assessment is a personal debt, but an association isn't collecting debts due another—the debts are due to it.
There should be no fear that an association is operating in the capacity of a collection agency when that association is reporting account information to a credit bureau any more than Chase or landlords or cellphone companies become a collection agencies when they report.
Acceptance by associations and association attorneys. There has already been widespread acceptance of association credit reporting by many associations. Managers and attorneys say that it is filling a need.
"Reporting assessment payments will transform association management," says Julie Stephens, CMCA, AMS, president of Exclusive Association Management in Atlanta.
Ricky Zilem, business development director at PS Properties in Round Rock, Texas, believes it's the next evolution in community management. "Our goal is to offer the most innovative solutions to our associations. We continue to look for ways to provide unrivaled innovation, unmatched service, and useful solutions to the associations we manage."
At the request of clients, Homeowner Management Services, AAMC, has been looking for a credit reporting solution for some time, says Mike Crew, CMCA, PCAM, president of the Alpharetta, Ga., firm.
Jeff Rembaum, an attorney with Kaye, Bender, Rembaum in Florida, believes Sperlonga's services are a step in the right direction. "This type of credit reporting is long overdue and should be welcomed by community associations throughout Florida and the rest of the U.S.," he says.
Empowering tool. Reporting association assessments to a credit bureau can have a positive impact on a consumer's credit profile. The Consumer Financial Protection Bureau just released a report, Project Catalyst, that looks for innovators seeking to expand access to credit to borrowers who may be excluded or mispriced by existing credit models. CFPB sees opportunities to expand access by incorporating nontraditional data into credit reports. CFPB remains interested in developments that would support expanded access to responsible credit for consumers. Association data is an example of nontraditional data that would enhance such access.
All this activity by the government regulators, national credit bureaus, and credit scoring companies has encouraged the reporting of new types of data so that credit reports present a fuller picture of a person's payment history. Adding homeowner assessments to credit reports helps consumers as well as associations without adding any significant business or legal risk.
Oscar Marquis is the principal of Oscar Marquis & Associates, which specializes in privacy and consumer reporting. He served as general counsel of Trans Union, one of the three national consumer reporting agencies, for over 24 years. He also served on the Federal Reserve Board's Consumer Advisory Council. omarquislaw.com
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