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Court Finds That Condo Association Management Company is Not Debt Collector (15 U.S.C. §1692a(6)(F)(i) explained)

On Behalf of | Dec 21, 2012 | Consumer Protection

We recently wrote a blog on how certain companies do not fall within the definition of a “debt collector”
under the Fair Debt Collection Practices Act.  Click here. If a person or business is not a debt collector under the FDCPA, then regardless of how despicable the conduct, they are not liable to the consumer under that law.   Another such way where a company that is apparently collecting a debt owed to another, but is not a debt collector, can be found in 15 USC §1692a(6)(F)(i).  This rarely reported section
states that a the Act does not apply to a person or company  “collecting or attempting to collect any debt owed … another to the extent such activity is incidental to a bona fide fiduciary obligation.”

There have been very few decisions on this section of the Fair Debt Collection Practices Act, and recently, the 11th Circuit Court of Appeals provided insight on how this section is properly applied.  In the case of Harris v. Liberty Community Management, the plaintiffs were all people who were behind on their condo association dues.  Liberty had been hired by the condo association to generally manage the association’s affairs.  A management agreement was signed between Liberty and the association that provided that Liberty act as the “sole and exclusive agent” of the association and perform tasks such as regular maintenance of the community’s common areas, negotiate contracts in the name of the Association for electricity, gas, fuel, oil, and water; purchase and maintain property insurance, investigate all accidents and claims; and make all necessary reports to insurance companies.  Liberty also prepares a budget for the Association, maintains the books and records of the Association, keeps the bank accounts of the
Association, makes deposits of all monies collected on behalf of the Association and draws checks in the Association’s name.  Additionally, Liberty prepared the monthly financial report showing  budget and income and expenditures, received and reconciled the monthly bank statements for the Association, and
assisted the Association with its yearly tax filings.

One of Liberty’s specific duties involves the collection of assessments as they become payable from homeowners.  The plaintiffs in the case were delinquent in the payment of the assessments, and when the collection tactics of Liberty came into question, the plaintiff’s sued under the Fair Debt Collection Practices Act.   The trial court dismissed the case under the FDCPA against the defendant holding that Liberty was not a debt collector under 15 USC §1692a(6)(F)(i).  The appellate court agreed.

The appellate court explained that first, the management company owed a fiduciary obligation to the  association.   This was because, as the general agent engaged in the numerous responsibilities, under Georgia law, a confidential relationship exists “where one party is so situated as to exercise a controlling
influence over the will, conduct, and interest of another or where, from a similar relationship of mutual confidence, the law requires the utmost good faith, such as the relationship between partners,
principal and agent, etc.”   Moreover, the collection of the unpaid assessments was “incidental” to Liberty’s “bona fide fiduciary obligation.”   The appellate court applied the Oxford English Dictionary definition of  “incidental” which means “occurring as something casual or of secondary importance.”   Pointing out that Liberty did much more, and items of greater importance, than collecting unpaid assessments, the court held that this collection was incidental to the fiduciary relationship between the management company and the condo association.

Here, the appellate court provided a good explanation, having a good set of facts to work with, of how the exemption found in §1692a(6)(F)(i) operates.  Companies, such as real estate management companies, that act as a general agent and that perform duties which elevate them to a confidential or fiduciary relationship will avoid liability under the FDCPA if part of their obligation is the collection of fees or

When you’re being pursued by debt collectors, you have rights,  and we’re here to help.  SmithMarco, P.C. has been protecting consumer rights since 2005. If you feel that you’re rights have been violated, please contact us for a free case review.