Court Says Manager Wasn’t a Debt Collector – But This May Not Always Be True

A federal Court of Appeals recently ruled that a community association manager wasn’t a “debt collector” for purposes of the Fair Debt Collection Practices Act (FDCPA), which strictly regulates the conduct of general debt collectors.

But managers shouldn’t take too much comfort in the decision because it left open the possibility that the result might prove different had the owners who sued gone about it differently.

“It was a fantastic outcome for the manager,” says Joe Wloszek, a member of Hirzel Law, PLC, a Michigan-based firm that works with community associations, “but I don’t know that you’d necessarily see it again.”

After the owners fell behind on their dues, the manager put a lien on their condo for unpaid dues, as required under state law to enforce a security interest. It subsequently hired a law firm to undertake a nonjudicial “foreclosure by advertisement,” as permitted by Michigan law. At a foreclosure sale, the highest bidder bought the unit for about $38,000, far below the $150,000 at which the owners valued the condo.

They sued the manager and the law firm under the FDCPA, claiming they both acted as a debt collector when they undertook the foreclosure. Among other things, the owners alleged the defendants wrongfully recorded a lien and foreclosed by advertisement in violation of the bylaws. The trial court dismissed the claims before trial, and the owners appealed to the Sixth Circuit Court of Appeals.

Read the full story now and learn how the lawsuit fell short:

Manager’s Conduct Doesn’t Make It a Debt Collector

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Matt Humphrey
President