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

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
rents.

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.