The Fair Debt Collections Practices Act (FDCPA) was created as a way to protect consumers from fraudulent collections practices. These protections include when and how a debt collector can contact a consumer and the options available to the consumer to dispute the debt. Debt collectors work on behalf of the original creditors in order to recover a debt and must identify who they are, who they represent, and must not fall out of compliance of FDCPA standards for collecting. In the case of rent collection, this leads to a few important questions:
When a property manager is collecting rent on behalf of a property owner/original creditor, does that mean that property managers are, in fact, debt collectors? And if they are, does that mean they have to follow the regulations of the FDCPA?
Let's start with Case Law For Landlord-Tenant Collection Practices.
Romea v. Heiberger & Associates
In 1998, a New York tenant filed a class action suit against the Heiberger & Associates law firm stating they violated the FDCPA when they sent a letter demanding back rent to be paid within 3 days or the tenant would be evicted. These type of three-day demand eviction notices were standard at the time but the tenant argued that the FDCPA violations included:
- The tenant wasn't given 30 days notice to dispute the debt
- The letter did not clearly disclose that the law firm was attempting to collect on a debt
- The letter threatened legal actions that weren't actually being taken
What is a debt?
The U.S. Court of Appeals for the 2nd Circuit had to first prove that the back rent was indeed a "debt" as defined by the FDCPA. A debt is defined as "any obligation ... of a consumer to pay money arising out of a transaction in which the money, property, insurance or services ... are primarily for personal, family or household purposes..."
After the determination that the back rent actually did constitute a debt, it was then determined that anyone who attempts to collect rent on behalf of the property owner or landlord is a "debt collector" and must abide by the rules of the FDCPA.
Are landlords Considered Debt collectors Under the Law?
The FDCPA does not actually apply to landlords or property owners collecting rent on their own behalf. In New York, landlords can still use the three-day demand letter before initiating eviction proceedings. Some states have now passed other regulations that landlords must follow in order to regain possession of their properties. The FDCPA, a federal regulation, becomes triggered when any third party collector, attorney or other agent is attempting to collect back rent on behalf of the property owner or landlord.
What FDCPA rules apply to back rent collection?
Again, the FDCPA was enacted in attempt to eliminate abusive debt collection practices. To read the actual language of the act, visit the FTC website.
Some rules to keep in mind when collecting back rent include:
- The tenant must initially be notified that the third party is attempting to collect a debt on behalf of a landlord and any information obtained will be used for that purpose.
- The debt collector or property manager has 5 days to send a written notice of what is owed, the original creditor/landlord, and informing the tenant that they have 30 days to dispute the debt.
- Property managers are only allowed to contact the tenant between 8 am and 9 pm.
- The property managers are not allowed to harass, threaten or use abusive language when contacting the tenant. This also includes falsifying information, threatening law enforcement or demanding inapplicable charges.
If the property manager violates these rules, as well as others listed in the FDCPA, they can be subject to a penalty up to the sum of the tenant's damages, the costs of the suit and other judicial awards of damages to the individual.
Hire an Experienced property management Debt collection Company
Experienced property management debt collection agencies, who follow the rules of the FDCPA, are available to collect back rent while respecting your customer. At BYL COLLECTIONS, we believe the education of our collection team and the consumer will lead to higher recovery rates and tenants who are more willing to resolve their past-due account. Contact us for a quote today.