Are Management Companies Debt Collectors?

A federal court in Indiana recently ruled that a management company is not a debt collector subject to the Federal Fair Debt Collection Practices Act (FDCPA or “the act”) if the owner is not delinquent when the management company is hired by the association. This court’s interpretation of the statute is persuasive, but not binding, in Washington courts because Indiana is in a different federal circuit.

In the 2015 case Gonon v. Community Management Services, Inc. an association hired a new management company. At the time, Gonon, the homeowner, was current on his association dues. In 2014, he failed to make several dues payments so the association sent him a notice that it had put a lien on his property. The notice was on the association’s letterhead but signed by the management company.

Gonon sued the management company arguing that it had violated the FDCPA by failing to make required disclosures about the debt. The act’s definition of debt collector excludes any person attempting to collect a debt that was not in default when the debt was obtained. The Seventh Circuit previously held that a management company obtains debts owed to the association at the time it becomes the association’s agent. Consequently, this court held that a management company is not a debt collector under the act if the owner was not already delinquent when the management company was hired by the association.

Other federal circuits have held the opposite, so until the United States Supreme Court resolves this conflict, or until the 9th Circuit (Washington’s federal circuit) chimes in with a binding opinion here, Washington management companies are left without guidance as to whether the FDCPA applies to them.

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Are Management Companies Debt Collectors?

A federal court in Indiana recently ruled that a management company is not a debt collector subject to the Federal Fair Debt Collection Practices Act (FDCPA or “the act”) if the owner is not delinquent when the management company is hired by the association. This court’s interpretation of the statute is persuasive, but not binding, in Washington courts because Indiana is in a different federal circuit.

In the 2015 case Gonon v. Community Management Services, Inc. an association hired a new management company. At the time, Gonon, the homeowner, was current on his association dues. In 2014, he failed to make several dues payments so the association sent him a notice that it had put a lien on his property. The notice was on the association’s letterhead but signed by the management company.

Gonon sued the management company arguing that it had violated the FDCPA by failing to make required disclosures about the debt. The act’s definition of debt collector excludes any person attempting to collect a debt that was not in default when the debt was obtained. The Seventh Circuit previously held that a management company obtains debts owed to the association at the time it becomes the association’s agent. Consequently, this court held that a management company is not a debt collector under the act if the owner was not already delinquent when the management company was hired by the association.

Other federal circuits have held the opposite, so until the United States Supreme Court resolves this conflict, or until the 9th Circuit (Washington’s federal circuit) chimes in with a binding opinion here, Washington management companies are left without guidance as to whether the FDCPA applies to them.

Share and Enjoy:
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  • Twitter
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