Articles

DELINQUENT ASSESSMENT COLLECTION ALERT

The collection of delinquent homeowner assessments must now meet the requirements of a federal debt collection law (this law is called the Fair Debt Collection Practices Act, 15 U.S.C. §1692, et. seq.)

A recent United States District Court in Southern California ruled that homeowners have an obligation to pay money to the Association and this obligation arises out of a "transaction" which is "primarily for personal, family or household purposes". Therefore, if a homeowner is delinquent in paying assessments, this is a debt within the definition of the Fair Debt Collection Practices Act and all who attempt to collect this debt are subject to this Act.

The act has many traps. It is long and complicated. Its intent is to prevent abuse. The key is to be courteous and not to harass or misrepresent your intentions.

WHAT YOU CAN AND CANNOT DO

I. Communicating With A Third Person.

A. Identify yourself, state that you are confirming or
correcting location information concerning the homeowner,
and, only if expressly requested, identify your employer;

B. DO NOT state that the homeowner owes a debt;

C. DO NOT communicate with this third party more than once,
unless requested to do so, or if you reasonably believe that
the prior response of such person is erroneous or incomplete and that such person now has correct or complete location information;

D. DO NOT communicate by postcard;

E. DO NOT use any language or symbol on any envelope or in the contents of any communication affected by the mail or telegram that indicates that you are in the debt collection business or that the communication relates to the collection of a debt;

F. If you know that the homeowner is represented by an attorney, only communicate with that attorney.

II. Communicating with the Homeowner.

A. Communicate only between the hours of 8:00 a.m. and 9:00 p.m. unless otherwise instructed;

B. DO NOT communicate at the homeowner's place of employment if you know or have reason to know that the employer prohibits the homeowner from receiving such communication.

III. Who To Communicate With.

A. Communicate only with the homeowner or his/her attorney, subject to the exceptions noted above, to locate the  homeowner.

IV. When to Cease Communication.

A. Cease communication if the homeowner notifies you in writing that he/she refuses to pay the debt; or

B. If he/she wishes you to cease further communication, except if your purpose is to communicate that you will start other procedures, ordinarily invoked by you (in the debt collection process).

V. No Harassment or Abuse.

A. DO NOT engage in any conduct which is to harass, oppress or abuse any person in connection with the collection of  assessments;

B. DO NOT use or threaten to use any violence or other criminal means to harm a person, their reputation, or their property;

C. DO NOT use obscene or profane language or language which is to abuse;

D. DO NOT publish a list of homeowners who refuse to pay;

E. DO NOT advertise any debt for sale;

F. DO NOT cause a telephone to ring or engage a person in a telephone conversation repeatedly with the intent to annoy, abuse or harass;

G. DO NOT call a homeowner without identifying yourself.

VI. No False or Misleading Representations.

A. DO NOT use any false, deceptive or misleading means to collect a debt;

B. DO NOT misrepresent or imply that you are affiliated with,or bonded by the United States, or any states, including the use of any badge or uniform;

C. DO NOT misrepresent the amount, character, or legal status of the debt;

D. DO NOT misrepresent your services or compensation which you may receive;

E. DO NOT represent or imply that you are an attorney, unless you are;

F. DO NOT represent that nonpayment will result in seizure, garnishment, attachment or sale of any property or wages unless this action is lawful and you intend to take such action;

G. DO NOT threaten to take any action that cannot be legally taken or that is not intended to be taken;

H. DO NOT represent or imply that if the debt is sold, referred or transferred, that the homeowner may lose any claim or defense;

I. DO NOT imply that the homeowner committed any crime in order to disgrace the homeowner;

J. DO NOT communicate or threaten to communicate to any person credit information which is known to be false, including failure to communicate that a disputed deft is disputed (if that is true);

K. DO NOT use or distribute any written communication which simulates or misrepresents that the document is authorized, issued, or approved by any court, official or agency of the United States or any state or which creates a false impression of its source, authorization or approval;

L. DO NOT use any deceptive means to collect or attempt to collect any debt or to obtain information concerning a homeowner;

M. DO NOT falsely represent or imply that accounts have been turned over to innocent purchasers for value;

N. DO NOT falsely represent or imply that documents are legal process, when they are not;

O. DO NOT use any business, company or name other than the true name of your business;

P. DO NOT imply that documents do not require action (or that they can be ignored);

Q. DO NOT represent or imply that you operate or are employed by a consumer reporting agency.

VII. No Unfair Practices.

A. DO NOT use any unfair or unconscionable means to collect a debt;

B. DO NOT collect any amount unless that amount is allowed by your agreement (CC&R's) or permitted by law (Civil Code);

C. DO NOT accept a postdated check by more than five (5) days unless the homeowner is notified not less than three (3) nor more than ten (10) days before the check is deposited;

D. DO NOT solicit any postdated check or other postdated instrument for the purpose of threatening criminal prosecution (stay away from postdated checks);

E. DO NOT threaten to deposit a postdated check or other postdated payment instrument prior to the date on the check or other instrument;

F. DO NOT cause charges (collect telephone calls or other fees) to be incurred by any person by concealing the true purpose of the communication;

G. DO NOT threaten to take nonjudicial action (i.e. nonjudicial foreclosure) if there is no legal right to do so, through an enforceable security interest, or if there is no intention to take possession of the property, or if the property is exempt by law from such possession;

H. DO NOT communicate with a homeowner by postcard;

I. DO NOT use any language or symbol, other than your address, on any envelope when using the mail or a telegram, exceptyou may use a business name if such name does not indicate that you are a debt collection business.

VIII. Notice Requirements.

Within 5 days after the initial communication, unless it is in the initial letter, you must send a written notice stating:

A. The amount of the debt;

B. The name of the creditor to whom the debt is owed;

C. A statement that unless the homeowner, within 30 days after receipt of the notice, disputes the validity of the debt,or any portion thereof, the debt will be assumed to be valid;

D. A statement that if the homeowner notifies you, in writing, within 30 days that the debt or any portion of it is disputed, you will obtain verification of the debt; and

E. A statement that upon the homeowner's written request within the 30-day period, you will provide the homeowner with the current name and address of the original creditor (see sample Notice).

IX. Disputed Debt.

A. If the homeowner notifies you in writing within the 30-day period that the debt or any portion thereof is disputed, or the homeowner requests the name and address of the original creditor, you shall cease collection of the debt, or any disputed portion thereof, until you obtain verification of the debt or the name and address of the original creditor and this information is mailed to the homeowner.

HINT: In the first letter to the homeowner, provide the required notice information and the informationin VIII A above and you will save time (see sample).

X. Multiple Debts.

A. If the homeowner owes multiple debts (i.e. a number of month's assessments) and makes a single payment, this payment cannot be applied to a disputed portion of the debt. The payment must be applied according to the homeowner's direction.

XI. Civil Liability.

A. Failure to comply with this law can result in:

1. Actual damage sustained by homeowner;

2. Damages up to $1,000.00; or

3. In the case of a class action, up to $1,000.00 for each named plaintiff, plus the lesser of $500,000.00 or one (1) percent of your net worth;

4. Attorney fees and costs.

B. Who does this law apply to?

1. Property managers;

2. Collection agencies;

3. Attorneys; and

4. Foreclosure companies/companies that enforce security interests.

C. Who this law does not apply to:

1. Self-managed associations who do their own delinquent assessment collection; and

2. Any officer or employee of a homeowners association.

XII. Key Points To Remember.

A. Be honest;

B. Be courteous;

C. Be polite;

D. Use envelopes (no postcards);

E. Amend your policy for collection of delinquents assessments; and

F. Amend your CC&R's/Bylaws/Rules.

SAMPLE NOTICE

NOTICE OF DEBT

Amount of Debt : $___________

Original Creditor : ABC Homeowners Association

123 Main Street

City, State, Zip Code

Validity of Debt :

Unless you dispute the amount owed, or any portion thereof,

within thirty (30) days, the debt will be assumed to be valid.

Verification of the debt has been obtained, and the amount

owed is correct.

This letter is an attempt to collect a debt and any