Determining Reasonable Collection Fees
Debtors can understandably be on the emotional defensive as their debts incur fees and spiral out of control. This is why it is incredibly important to adhere to compliant processes and reasonable costs defined by state and federal laws. Acting quickly on delinquent accounts can reduce homeowner frustration, ongoing charges, and keep the association out of court.
In a recent case, a plaintiff in a community alleged that debt collection fees charged were unreasonable in relation to their original assessments, creating a liability to the homeowners association. The HOA managers and board members hired Equity Experts to handle automated, time-saving debt collection techniques to improve the community experience. Included in their services is a defense litigation team to explain a detailed account of how fees are accrued and collected.
Understanding and applying local and federal laws
Most community managers and board members of associations don’t know all of the legal aspects regarding changing FDCPA laws that protect debtors. But this HOA trusted Equity Experts to understand the regulations and incorporate them into the community processes to shield them in this type of situation. They relied on formal agreements stating how actions and acceptable fees would be handled on their behalf. Because every communication with the resident throughout the collection process followed strict legal guidelines, it was found that all charges were reasonable and Equity Experts and the community would not suffer any financial consequences. The ruling encourages all reputable debt collection agencies to maintain fair business practices.
When a resident experiences financial trouble, it must be addressed right away to resolve an escalating problem. In this case, the resident ended up being charged the original assessment plus fees for phone calls, payment processing, client reports, research, balance reconciliations, and general overhead. These were set costs that may have been avoided. Even if a small assessment balance remains unpaid over time, it will escalate due to debt collection efforts.
All prepared documentation between Equity Experts and the community association showed FDCPA law was followed. The way the fees were collected, directly from homeowners by Equity Experts, was also not a violation as we were authorized to charge collection costs to the homeowner, deferring them from the HOA process for a smoother transaction. The agreement included a schedule of collection activities and resulting fees.
The court opinion shows the importance of accurate and compliant debt collection agreements. Equity Expert’s language concerning the permissions from the HOA and costs for services shielded the community and the debt collector from liability under the FDCPA.
Learn more about the ruling of the Sixth Circuit Court of Appeals in Sparks v. EquityExperts.org, LLC. Equity Experts wants community associations to know the depth of debt collection and fiduciary experience we have in our industry. Contact us to discuss the challenges your HOA is currently facing or wants to avoid. Equity Experts offers transparency, attention to detail, honesty, and empathy for everyone involved. Our 98% success rate boils down to effective and timely communication.
For more on Equity Experts and debt collection, see the following: