Eleventh Circuit Holds Management Company Collecting HOA Fees Exempt From FDCPA

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Recently, the U.S. Court of Appeals for the Eleventh Circuit held that a management company collecting debts for a homeowners association was exempt from the FDCPA because collecting the unpaid assessments was incidental to the company’s bona fide fiduciary obligations. Harris v. Liberty Cmty. Mgmt., Inc., No. 11-14362, 2012 WL 6604518 (11th Cir. Dec. 19, 2012). In Harris, a homeowners association contracted with a management company to perform various tasks, including collecting past due assessments from homeowners. After warning the plaintiffs that their water service would be disconnected if they did not pay their outstanding association dues, the management company had their water service suspended. The plaintiffs asserted that the company was a debt collector under the FDCPA and violated the Act by terminating their water service. Under Section 1692a(6)(F)(i) of the FDCPA, an individual or entity is exempt from the Act when “collecting or attempting to collect any debt owed…another to the extent such activity is incidental to a bona fide fiduciary obligation.” The Eleventh Circuit held that the management company fell within this exemption. Because the company was the homeowners association’s agent, it owed a fiduciary duty to the association. The court also found that collecting the debts was “incidental” to the company’s fiduciary obligation, noting that the company did many other tasks for the association other than collect assessments, such as obtaining utilities, purchasing insurance, and assisting the association with its tax filings. In addition, the Eleventh Circuit affirmed the district court’s dismissal of the plaintiffs’ claims under the Georgia Fair Business Practices Act. The court explained that the management company’s decision to stop the water service after providing the plaintiff notice was not unfair or deceptive.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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