What are initial demand letters and why are they so important?
When we begin the process of collecting delinquent assessments from an owner in a condo or HOA, our first course of action as a collection agency (after extensive underwriting) is an initial demand letter. It’s required by Federal law and by most states. Even if you are already sending a demand letter, you might be breaking the law if you don’t get it right. So let’s review this very important step in collections that is so critical to successful condo and HOA collection events.
What The Law Says About Initial Demand Letters
According to the Fair Debt Collections Practices Act (FDCPA) (See, 15 U.S.C. 1692g §809) it is required by a third-party collection agency and even lawyers to provide such a notice. The description of this letter is simple:
Contents of Your Initial Demand Letter
- Notice of debt; contents Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
- the amount of the debt;
- the name of the creditor to whom the debt is owed;
- A statement that if the consumer notifies the debt collector in writing within [a] thirty-day period that the debt, or any portion thereof, is disputed
- A statement that unless the consumer, within thirty days of receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
- A statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt.
- A statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
So, an initial demand letter MUST be sent, in writing, within 5 days of the first contact regarding the debt. Then, once the letter has been received, the creditor (that’s the association, or the collection agent they have hired to represent them) must wait a full 30 days for the debtor (that’s the delinquent homeowner) to dispute the debt. During this 30-day period, you may NOT contact the homeowner regarding the debt.
If the consumer notifies the debt collector in writing within the thirty-day period described above that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this subchapter may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.
Admission of liability
The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
Answers to Your Questions About Initial Demand Letters
Some questions remain regarding the initial demand letter that should be addressed so as not to violate the rights of the consumer:
Can the debt collector call the debtor during the 30-day initial demand period to resolve the debt?
Absolutely not. The thirty (day) period is also known as “the silent period” and it is a violation to call the debtor and make any demands. They have 30 days and that must be respected.
Can the debt collector report me to a credit bureau during this thirty-day period?
Absolutely not and if they do they are not only in violation of the FDCPA but of the Fair Credit Reporting Act (FCRA).
What if I do not believe I owe the money that the debt collector is attempting to collect?
Excellent question. If such is the case, then you have thirty days to dispute the debt. Call, write, or in some cases, sophisticated collection companies (such as Axela) will direct you to an online portal where you can dispute the debt online and in writing.
What if I do owe the money but I do not have the resources to pay currently?
The best piece of advice we can give you is don’t ignore the demand letter and respond. Call the debt collector and discuss alternative ways to resolve the debt.
How does an initial demand letter benefit the debtor?
Many people who receive these letters will be surprised that they owe money. They may claim that they did not know about the debt that was owed and in community associations this is often the case. This gives the debtor fair warning that a debt is owed and that the matter may be escalated.
Should an initial demand letter be followed by a phone call after the 30 day waiting period?
While phone calls can be an effective tool in the debt collector’s toolbox, the law is very strict about when you can make calls, who you can speak to, and what you can say. Check out this article for more information on outbound calls.
Community Association Collections 101 is a series of articles that is intended to throw light on how condos and HOAs can collect. What are initial demand letters and why are they so important is an important first step in the collections process for HOA Collection Agencies. If your condo or HOA has delinquencies and you are eager to try something more effective, then the “legal approach” of filing a lien and foreclosing on a property contact Axela Technologies and let us show you how the future collects. Hint…There is no cost or risk to the community association.