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An Article
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What is the Fair Debt Collection Practice Act's role in protecting Homeowners?
How does this unique set of laws protect homeowners living in CID's from the foreclosure industry?
January 20, 2003
By
Robert Thompson
Copyright ahrc.com
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Santa Ana, California - What makes the Federal Debt Collection Practices Act (FDCPA) unique to homeowners associations?
The CAI passed laws that enable them to circumvent the constitutional rights of homeowners, but they have outright and egregiously violated the FDCPA.
COLLECTIONS 101
The Fair Debt Collection Practices Act of 1978 was passed primarily to protect consumers from debt collector abuse. If you have any doubt, read the act. Under 15 USC Section 802 it says there is, “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.” Lawyers in the foreclosure industry are committing the very abuses the Act was authored to prevent. According to my source, this group of foreclosure lawyers does not abide by or consider itself bound by the ACT. I disagree.
Who is defined as a “debt collector” under the FDCPA?
To be bound by the FDCPA, a person must be a debt collector as defined under the Act. To qualify as a debt collector, the person collecting must regularly collect debts. The FDCPA covers collection agencies and attorneys as well as others. The FDCPA does not apply to a primary creditor collecting for itself. What this means to homeowners is that anyone who attempts to collect a debt from them on behalf of their association, who is not a title holding member, that regularly collects debts, is bound by the FDCPA and can be held accountable for violating this set of laws. Whether the participants of the Foreclosure Industry like it or not, they are bound by the FDCPA.
What debts are protected under the FDCPA?
The FDCPA does not cover all debts, but it does cover debts owed by members to their homeowner’s association. The term "debt" means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. Obligations arising out of commercial transactions are not covered under the FDCPA.
Can you dispute a debt if no one calls or sends you letters?
No, how could you? The FDCPA states that debts must be "validated" under 15 USC 1692g Section 809. (a) 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 --
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after 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;
(4) 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 or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) 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.
It is clear that these foreclosure-collection agencies are not attempting to contact the member. That prevents the member from disputing the debt and enables the agency to add fraudulent charges. Unlike the rest of the collection world, foreclosure-collectors are paid by adding fees. The rest of the industry operates on a "percentage of what is collected" basis. If they don't collect, they don't get paid, period. Enabling foreclosure collectors to just tack fees onto a member's debt, without any guidelines or accountability is criminal.
Next, they forward the account to the foreclosure-collection lawyer, who usually owns the collection agency (or his spouse does). That is a complete conflict of interest. Clients of the collection industry do not place primary and secondary accounts with the same agency or affiliates because the primary has no incentive to collect, a clear conflict of interest. The same premise applies here. What incentive does the foreclosure-collector have to collect? They add their fees and get paid when the attorney forecloses no matter what. If they collect, the attorney can't add his thousands to the debt.
Prior to placing a lien, the attorney has a responsibility under the FDCPA to validate the debt by attempting to communicate with member/debtor. If the member/debtor disputes the debt within the required time, they must verify the debt or confirm it is accurate. During the verification process, misapplied payments and other errors would be caught, corrected and all added fees become null and void. But then the attorney and the collection agency make nothing.
Can an attorney foreclose using his fees or the collection agency's alone?
No. Without the association's debt, they would have no chance of collecting. They "use" the association's tiny debt as a means to generate thousands in fees. Then, non-judicial foreclosure is used to extort those fees from homeowners. The fact that they are using them to foreclose is however, a problem. Under the FDCPA, 15 USC 1692f, Section 808, paragraph 1, added fees must be "incidental to the original obligation and permitted by law." Clearly, 1200% of the original debt is not "incidental." Whether or not those fees are legal, much less "permitted by law" is up for debate with the Bar Association and Collection Industry. I doubt either would find 1200% of an original debt “reasonable.” Both the collection agency and collection attorneys are in violation of the Act and profit from it significantly.
Last, and possibly most important, if the member/debtor has the right to dispute a debt, then the FDCPA defines the "debt" as all fees incurred up until the date of the attorney's initial communication. In order for the foreclosure attorney's to use their fees and charges to foreclose, they have to add fees into the debt that have not been incurred. I wonder what the Bar Associations think about that?
Considering the gravity and consequences of these violations, any collection agency that cannot provide proof of communication attempts with a debtor whose debt can result in foreclosure, should be stripped of their collection license and harshly fined. Any attorney that is guilty of this should be disbarred and prosecuted by the District Attorney.
I would like to review copies of any collection fees or other added charges members might have been given during a foreclosure proceeding. If you can refer me to a case I can pull or mail copies, I would be very interested to review them.
Below is a copy of the Fair Debt Collection Practices Act of 1978.
If you live in a homeowner’s association you should familiarize yourself with this Federal Act and the Federal Trade Commission
In My Next Article:More Violations of the FDCPA and ways for Homeowners to protect themselves from illegal foreclosure.
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