Neither a Community Association Nor its Management Have Liability under the Federal Fair Debt Collections Practices Act

By David C. Swedelson, Senior Partner at SwedelsonGottlieb; Condo lawyer and HOA attorney

We have had to extricate several of our community association clients (and often their management as well) from claims or lawsuits relating to the federal Fair Debt Collections Practices Act (FDCPA). It is well settled law that the FDCPA applies to the collection of delinquent and unpaid assessments for condominium and homeowner associations. However, the FDCPA does not apply to collection efforts which a community association, the creditor, undertakes on its own to collect on a debt, nor does it apply to its agents whose collection activities are “incidental to a bona fide fiduciary obligation” or which concern a “debt which was not in default at the time it was obtained by such person.”

As it relates to the collection of delinquent community association assessments, courts have held that an association management company is not a “debt collector” under the FDCPA. Courts have held that an association’s management company falls under the exceptions found in the FDCPA. This determination was based on the fact that the management company has a fiduciary obligation to collect assessments on behalf of the association. But this exemption only applies if the management company was obligated to collect the delinquent assessment debts prior to them being delinquent. A management company may be responsible to comply with the FDCPA if an owner/property was already in collection at the time the management company started managing the association.

Provided that the management company is obligated to collect assessments on behalf of an association (and this should be part of a written Management Agreement), the management company should not be held to be a “debt collector” under the FDCPA.

David Swedelson can be contacted via email: dcs@sghoalaw.com