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Is Credit Reporting HOA Dues Legal?

 Oct, 18, 2014

  The short answer is — “Yes”.     Fortunately, the long answer is also — “Yes”.

  We get this question regularly.  In fact, apparently we get it because some people serving the Community Association industry actually infer it might not be legal to credit report HOA dues.  Why?  Why would anyone mislead on this subject?  While there’s some speculation as to why anyone might ‘imply’ credit reporting HOA dues crosses some imaginary line, one thing is clear.  This misinformation seems to emanate from people who also happen to profit from other processes — like say, the lien and foreclosure process just to name a few.

Beware of ‘Subtlety’

  In other words, some people subtly say things like “credit reporting might  not be legal” yet they’ll never point to any specific law or statute which supports such an allegation.  I’ve even had Board Members tell me their Association’s attorney said credit reporting HOA dues “might not be legal”.  My first thought was, ‘If your attorney doesn’t know what’s legal — perhaps it’s time to go attorney shopping…’.

  Here’s the truth.  The Federal Fair Debt Collection Practices Act was established by an Act of Congress to define and regulate collection activities on consumer debts.  The Act clearly defines property related obligations as consumer debts when it states (under ‘Definitions’) that consumer debts include:

any obligation… of a consumer to pay money arising out of a transaction in which the… property, … or services… of the transaction are primarily for personal, family, or household purposes…”   [See § 803.  Definitions, section (5) in the above link for the full definition]

  Are homeowners association assessments monies that need to be paid arising out of a transaction in which the property is primarily for personal, family, or household purposes?  Yup.

  The Federal Fair Debt Collection Practices Act then goes on to decree, under “Communication With Third Parties”, that in regard to such consumer debts “a debt collector may NOT communicate, in connection with the collection of any debt, with any person OTHER THAN a consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.”  [EMPHASIS ADDED]

Credit Reporting HOA Dues Is Clearly Lawful

  So this Federal Act of Congress authorizes “obligations… of a consumer to pay money arising out of a transaction in which the… property… are… for… personal, family, or household purposes” as able to be communicated to “a consumer reporting agency” by a collection agency.

  Any questions?

  The phrase stating property related debts can be reported to a consumer reporting agency “if otherwise permitted by law” is where Congress simply left the door open in case the Legislature ever enacted laws to the contrary in the future — which it hasn’t.

  So, if anyone tells you there’s a law or statute prohibiting communication of these Federally-defined consumer debts to a consumer reporting agency, please ask them to site the exact law or statute stating such.  If you find you’re confronted with allegations from professionals implying it may be illegal without being able to back it up… perhaps they’re not professionals.

  Now there is wisdom to be applied in this arena.  It’s important for Boards to work with a national firm which has decades of expertise in credit reporting consumer debts, like HOA dues.  When you work with such a firm, accountability for compliance with all Federal and State credit reporting and collection regulations is then the responsibility of that firm, and not the Association or its Board Members.

  Credit reporting is quietly collecting hundreds of thousands of dollars for Community Associations all over the country.  All without liens, foreclosures, or fracas.

  This 21st Century Solution is changing the landscape of the HOA industry.  And it’s absolutely available.


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