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The Fair Debt Collection Practices Act (FDCPA) defines a “debt” as a consumer’s obligation to pay money arising out of a transaction in which the money, property, insurance, or services are primarily for personal, family, or household purposes.
The Sixth Circuit’s take on this definition? FDCPA debt, condo fees. Same difference.
Here’s how this came to pass.
In 1992, Camille Haddad purchased a condominium as his primary residence, and became obligated to pay fees to the condominium association. He paid those fees and lived at the home until 2005, when he relocated. He reclassified the condo as a rental property in 2006.
In October and December 2008, Haddad received collection letters from Alexander, Zelmanski, Danner & Fioritto, PLLC (the firm) on behalf of the condominium association. The letters said that Haddad was in default on his obligation to pay condo association fees as required by the condominium deed.
The amount due was $898.00, which included past-due assessments, late fees, interest and attorney's fees. (Sidebar: Cheapest. Condo fees. Ever.)
The letters referred to the amount Haddad owed as a "debt" and specifically referred to the FDCPA, (which is interesting, because the firm would later argue that it wasn't a "debt").
Haddad timely responded to both letters, and requested verification of the debts he allegedly owed. The firm, however, didn't verify the debts and recorded a Notice of Lien in May 2009.
(The condominium association eventually corrected its records and the lien was discharged in February 2010.)
Haddad sued the firm under the FDCPA, alleging that it had failed to comply with statutory requirements that prohibit using any false, deceptive, or misleading representation in the collection of any debt and continuing collection of a disputed debt until the debt collector obtains verification of the debt.
Since the statutes require that an underlying debt be incurred for personal rather than business purposes, the district court granted the firm's motion for summary judgment, holding that the condominium assessments at issue were not encompassed by the statutory definition of debt.
The question in this appeal was whether the condo fees should qualify as a "debt" under the FDCPA. Here, the Sixth Circuit agreed with Haddad that his obligation to pay past-due assessments counted as a debt because the obligation arose from his original purchase transaction of the underlying property. It didn't matter that he later recharacterized the condo as a rental.
What does this mean for you? If your firm is collecting debts for condo associations in a Sixth Circuit state, be exact and mind your FDCPA Ps and Qs. Or, more specifically, your §1692 Gs and Es.