SB 5211 Protects Abusive Collection Practices of Homeowner Association Managers

February 22, 2003

By AHRC News Services

A Washington homeowner writes that the Washington State Senate has passed a bill , SB 5211, that exempts homeowner association managers from being classified as debt collectors. He states that the bill is now referred to the House Financial Institutions & Insurance Committee.

He would like to know if there are any contact people in the state of Washington to help him in this fight. He has sent emails to everyone in the House advising them that this bill is nothing but a Non Judicial Foreclosure Act similar to those that have been responsible for tens of thousands of foreclosures in states like California, Texas, Arizona and others across the nation.

Several Federal courts have declared that homeowner association managers and lawyers who attempt to collect association assessments and fines are debt collectors - and thus subject to the Fair Debt Collection Act . Despite this, the senate of the State of Washington voted recently 49 - 0 to pass a bill (SB 5211)that would exempt these people from being classified as debt collectors. The bill is supported by management companies and real estate interests.

AHRC believes that this bill should not become law. One of the top complaints received by AHRC from around the country is the collection practices of management companies and lawyers. If anything, they should be the very ones who are subject to debt collection laws for at least two reasons.

First, they are not an arms-length collection agency. They are intimately involved in an association, and depend for their livelihood on the the good graces of the board who hired them. They thus become enmeshed in the sometimes petty and vicious politics of homeowner associations. Non-homeowner association collection agencies are not involved so deeply in people's lives. They are simply trying to collect money. Thus, there is an even greater need for the regulation of these managers and lawyers.

Second, it is a common practice that managers get kickbacks in one form or another from homeowner association lawyers who are trying to lien and foreclose on homes in associations. This incestuous relationship can only breed corruption and trouble.

Proponents of the bill blithely state that such disputes can be resolved in the courts. This is exactly what the lawyers want. The homeowner sues the association, which is protected by a multi-million dollar insurance policy. The association lawyer then drags out the lawsuit in order to bleed the homeowner dry. Most lawsuits cost $40,000 at a minimum.

As most homeowners do not have that type of money, they run a significant risk of losing because they cannot afford to mount an effective case. When they lose, they get hit with attorney fees that they cannot pay, and their house is foreclosed on. Voila ! - the lawyers and managers masterplan has worked.

Those who collect debts - whatever their name and title - are debt collectors, and subject to some of the lower propensities of human nature. Just because somebody is an association manager or lawyer does not mean that they are exempt from these propensities. If anything, they are even more prone to them.

Hopefully, if enough people contact the members of the House in the State of Washington, common sense, wisdom and fairness will prevail. The bill is just but one more sign that the CAI lobby group is intent on eroding all the rights of homeowners and stealing their money. It is clear that everybody should pay their debts. It is equally clear that debt collectors should go about collecting debts in a proper manner. This bill destroys those protections.

Summary of SB5211

SB 5211 - DIGEST - (AS OF SENATE 2ND READING 2/14/03)

Declares that "collection agency" does not mean and does not
include property management companies collecting assessments,
charges, or fines on behalf of condominium unit owners
associations, associations of apartment owners, or homeowners'
associations.



Legislativie History of SB 5211:

SB 5211 Clarifying that certain entities are not collection agencies.
Sponsors: Senators Kohl-Welles, Winsley, Fairley, Prentice, Benton, Keiser

2003 Regular Session

Jan 20 First reading, referred to Financial Services, Insurance & Housing. (Original Bill
Jan 28 FSIH - Majority; do pass.
Jan 29 Passed to Rules Committee for second reading.
Jan 31 Placed on second reading by Rules Committee.
Feb 14 Rules suspended. Placed on Third Reading.
Third reading, passed; yeas, 49; nays, 0; absent, 0; excused, 0. (Roll Calls)
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SENATE BILL REPORT - SB 5211 - An Analysis

As Passed Senate, February 14, 2003

Title: An act relating to collection agencies.

Brief Description: Clarifying that certain entities are not collection agencies.

Sponsors: Senators Kohl-Welles, Winsley, Fairley, Prentice, Benton and Keiser.

Brief History:
Committee Activity: Financial Services, Insurance & Housing: 1/27/03, 1/28/03 [DP].
Passed Senate: 2/14/03, 49-0.

SENATE COMMITTEE ON FINANCIAL SERVICES, INSURANCE & HOUSING

Majority Report: Do pass.

Signed by Senators Benton, Chair; Winsley, Vice Chair; Keiser, Prentice, Reardon,
Roach and Zarelli.

Staff: Elizabeth Mitchell (786-7430)

Background: The term "collection agency" includes any person engaged in collecting claims "owed or due another person." Property management companies sometimes collect
homeowners and condominium association dues for their clients.

Certain businesses are exempt from the definition of "collection agency" if their collection activities are "directly related to the operation of a business other than that of a collection agency." Property management companies are not currently listed under this exemption.

Summary of Bill: Property management companies collecting assessments, charges or fines on behalf of condominium unit owners' associations, associations of apartment owners, or
homeowners' associations are exempt from the definition of "collection" agency.

Appropriation: None.

Fiscal Note: Not requested.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Testimony For: Property management companies that collect homeowners' and condominium association dues are acting under the direction of their clients, and should not be considered collection agencies. There is recourse available through the court system if
people feel they have been wronged by a property management company's actions.

Testimony Against: None.

Testified: PRO: Bob Mitchell, WA Assn. of Realtors; Terry Preston, Res. Com. Properties.

The Senate Vote on SB5211

2/14/03 10:54 a.m.
WASHINGTON STATE LEGISLATURE
Roll Calls on SB 5211

Roll Call on February 14, 2003
Chamber: SENATE 2003 Regular Session
Bill No.: SB 5211
Description: 3RD READING & FINAL PASSAGE
Item No.: 3
Transcript No.: 33 Date: 02-14-2003
Yeas: 49 Nays: 00 Absent: 00 Excused: 00
Voting yea: Senators Benton, Brandland, Brown, Carlson,
Deccio, Doumit, Eide, Esser, Fairley, Finkbeiner,
Franklin, Fraser, Hale, Hargrove, Haugen, Hewitt,
Honeyford, Horn, Jacobsen, Johnson, Kastama,
Keiser, Kline, Kohl-Welles, McAuliffe, McCaslin,
Morton, Mulliken, Oke, Parlette, Poulsen,
Prentice, Rasmussen, Reardon, Regala, Roach,
Rossi, Schmidt, Sheahan, Sheldon, B., Sheldon, T.,
Shin, Spanel, Stevens, Swecker, Thibaudeau, West,
Winsley, Zarelli

Click here for current information on SB5211

Sponsors of AB5211

Mail to
Senator JEANNE KOHL-WELLES

Mail to
Senator SHIRLEY WINSLEY

Mail to
Senator DARLENE FAIRLEY

Mail to
Senator MARGARITA PRENTICE

Mail to
Senator DON BENTON

Mail to
Senator KAREN KEISER