FAIR DEBT COLLECTION

Collection of assessments is a routine matter for most community associations. However, every community has a few slow paying members. One of the more difficult functions of running a community association is the collection of past due assessments from a member who may be having financial problems or who simply refuses to pay. In collecting the assessments, the association, the manager, and the association's attorney make various contacts with the member regarding the past due amounts.

The issue of debt collection may have some unusual consequences for an association due to the Fair Debt Collection Practices Act of 1977. This federal law was adopted to avoid threatening late night telephone calls and other harassing tactics of commercial debt collectors. However, the definition of a "debt collector" is fairly broad, and generally covers most third parties, who are collecting debts on behalf of another. Certain actions of debt collectors and specific communications are prohibited by this federal law. A "debt collector" may not contact a creditor at work, may not contact the debtor directly if the collector knows the debtor is represented by an attorney, and may not contact the debtor at any unusual time or place, or in such manner which the debt collector should know is an unusual or inconvenient time or place for the consumer. Presumably, after 8:00 A.M. and before 9:00 P.M. are acceptable times for contact. A debt collector is not allowed to accept a check post-dated by more than five business days, unless certain notices are given as to when the check is subsequently going to be cashed. Additional specified unfair practices are enumerated in the law.

Violation of the law contains substantial penalties, ranging from, in the case of an action by an individual, up to $1,000.00, and in the case of a class action against a debt collector, up to $500,000.00 or one percent (1%) of the net worth of the debt collector. Additionally, attorney's fees may be imposed if the debt collection actions were taken in bad faith or for the purpose of harassment.

The Federal Fair Debt Collection Practices Act, and similar state laws, make it very important for a community association to follow a set procedure when attempting to collect past due amounts from members. Individual personalities and viewpoints should be left out of the collection equation; otherwise, the member could claim harassment or unfair debt collection practices, depending on the type of contacts made.

If you need further information on the details of the Fair Debt Collection Practices Act or on validation of debts when requested by a member, an inquiry should be made to the association's attorney.

By: Joseph R. Cianfrone, Esq.