Debt collection done wrong is a very expensive proposition. Even if you are not a licensed debt collector you cannot or should not violate Fair Debt Collection Statutes. It can become expensive and litigious. Even if you are a manager or a member of the board of directors at your HOA or Condo you need to act within the boundaries of the law and with great care.
Debt collection is one of the most highly regulated industries in the United States of America. There are Federal laws (FDCPA – Fair Debt Collections Act), and each state may have its own fair debt collection regulations. So some of the things you need to know about fair debt collection laws that apply to your HOA will depend on the state you’re in. Fortunately, most of the time state laws mirror federal regulations. This especially is the case when it comes to community associations.
What the Fair Debt Collection Practices Act Requires for HOA debt
The laws state that certain steps can be taken and gives very specific time tables to accomplish them. The first step is an initial demand letter giving the owner 30 days to dispute the debt, pay the debt, or work out a payment plan. Next, the collection agency must send out a properly worded notice of intent to lien, begin outbound calls, notify the mortgagor that the subject delinquent unit is in arrears to the association, and potentially report the delinquency to credit bureaus.
Some of these steps are harsh but the process can be brought to a halt when an owner starts to cooperate and engage with an eye to pay. Continued letter strings and notices are important, letting the delinquent owner know that this debt will not be forgotten, and finally a lien must be placed to protect the interest of the association.
What NOT to Do When Calling Delinquent Homeowners
Here is a list of things you should not do if you are a first-party creditor and definitely should not be done by a licensed debt collector to ensure fair debt collection laws are followed:
- DO NOT identify yourself to a debtor as if you were an official of a government agency. This includes not only law enforcement but a credit reporting agency as well.
- DO NOT make threats that the debtor can be arrested or detained by a law enforcement agency.
- DO NOT post up a list of shame at your Condo or HOA. Never has there been a worse idea that only leads to lawsuits, animosity, and anger.
- DO NOT threaten a delinquent owner with violence or harm.
- DO NOT use obscene or profane language.
- DO NOT call or text a delinquent homeowner repeatedly.
- DO NOT call before 8:00 a.m. or after 9:00 p.m. without permission
- DO NOT call an owner at work, if it was requested in writing not to do so.
- DO NOT contact a delinquent member of the association at all if the collector has been advised, in writing, to stop contact altogether or to contact only their attorney.
- DO NOT contact a member of the association in any way if they have an active bankruptcy case pending in court.
- DO NOT cut off utilities in a delinquent owner’s property.
- DO NOT publically humiliate delinquent members at a board meeting or any other public place.
- DO NOT prevent delinquent homeowner access to their place of residence.
What You CAN Do to Collect Delinquent Assessments
The Legal Process
If you want to recover your money for your community association, and the courtesy letters are not working, it’s time to call in professionals. If you are calling in an attorney you are engaging a “legal process” that may result in the recovery of your money, but this process is actually engineered to foreclose on a lien. Once the lien is foreclosed the association has title to a unit but not money in hand. It is up to the association to monetize the title. Truly, this is a drastic course of action that should be avoided.
The Collections Process
What needs to be done is to engage a “collections process” this is licensed, professional, and even compassionate. It’s time to engage the delinquent owner and work with them to resolve the issue. There are always reasons people are not paying so the first step is to understand the circumstances that led up to this situation. Some people genuinely have financial problems so a plan must be established to get them on the right track. Then there are some owners who rather keep their money in the bank and let the other members pay for their common element expenses. It varies but no matter what, delinquencies need to be addressed.
Choose a Licensed Partner That Specializes in Condo/HOA Debt Recovery
The collection of debts is an art and a science that requires the right human touch combined with advanced technology. Most important is that you know the laws that regulate the fair collection of debts in your HOA.
Axela Technologies has the technology and customer service team that brings results. We take a great burden off the backs of your board of directors and managers and disburse collected amounts every month.
Debt collection is a serious matter and requires a licensed professional enterprise. For a free no obligation analysis contact Axela Technologies and let our client satisfaction team show you how it can be done at no cost and no risk to your association and done right.