Attorneys who regularly engage in collection work for communityassociations have increasingly become targets for lawsuits filed by professional consumer attorneys under the Fair Debt Collection Practices Act (“FDCPA” or “the Act”), 15 U.S.C. § 1692 et. seq., and analogous state laws.These suits can be costly, distracting, and can create significant tensions between HOA attorneys and the management companies and associations they serve. 
FDCPA litigation in this sector appears to be on the rise, and as more people move into planned communities, it seems unlikely to go away any time soon. For this reason, HOA attorneys who engage in conduct regulated by the FDCPA should stay abreast of the many recent FDCPA decisions and litigation trends that can significantly impact theircompliance obligations and litigation risks.  Attorneys should also start an open dialogue on FDCPA risks with the management companies and associations they serve.
The FDCPA has been with us for forty years, and it has yielded thousands of published decisions.  The case law in this area can be very frustrating, as it is riddled with circuit splits, unresolved issues, and unpredictable balancing tests which can turn on disputed facts.  This post is intended to cover some of the basic concepts that bear on any FDCPA claim, and to provide a general overview of litigation trends and risks that may be of special concern to HOA attorneys and their clients.  It was adopted from a presentation given on the subject at the January 2019 CAI Law Seminar.
Are Unpaid HOA Obligations “Debts” Under The FDCPA?
Before exploring litigation risks, let’s start with some of the basics.  Are unpaid homeowner assessments and related charges imposed by HOAs subject to the FDCPA?  This issue can be more nuanced than it might appear at first glance.
The unpaid obligations owed to your HOA clients will not always qualify as a “debt” under the FDCPA.  The Act defines a “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes. . .”  See 15 U.S.C. §1692a(5).  If you or your firm are embroiled in FDCPA litigation, do not concede that a “debt” was incurred without examining the issue closely.
Determining whether a “debt” was incurred by a property owner can fact-intensive.  This threshold issue should not be assumed based upon a reading the CCRs or the paperwork documenting the purchaseof the property. See Turner v.Cook, 362 F.3d 1219, 1226-27 (9th Cir. 2004)(proving existence of a “debt” under the FDCPA is a “threshold” issue in every FDCPA action).  To the contrary, the determination of whether a “debt” was incurred may require an examination of the transaction as a whole, paying particular attention to the purpose for which the credit was extendedin order to determine whether[the] transaction was primarily consumer or commercial in nature.”  See Bloom v. I.C. System, Inc., 972 F.2d 1067, 1068 (9th Cir. 1992) (emphasis added, citationand quotation marks omitted)(personal loan from friend used to start softwarebusiness not a “debt” under the Act: “Neither the lender’s motives nor the fashion in which the loan is memorialized are dispositive of this inquiry.”).  This may involve not only a reviewof documents relatingto the transaction itself, but also an evaluation of the debtor’s conduct before and afterthe obligation was incurred.  See Slenk v. Transworld Sys., Inc., 236 F.3d 1072, 1075 (9th Cir. 2001).
Unpaid HOA assessments relating to rental properties generally do not qualify as “debts” under the FDCPA.  Although assessments on properties used as the obligor’s primary residence likely are “debts” subject to the Act, unpaid obligations imposed on an owner of a rental property are incurred for business purposes and are not subject to the Act.   See, e.g., Lowe v. Maxwell & Morgan, 322 F.R.D. 397 (D. Ariz. 2017) (denying class certification; individualized inquiries re: use of properties by putative class members); Connelly v. Ekimoto & Morris, LLLC, 2018 WL 33129597 (D. Hawaii July 5, 2018) (unpaid assessments for condo where plaintiffs did not reside not a “debt”).  Where the plaintiff contends that a rental property was originally purchased with the intent to reside in it as a primary residence, and the plaintiff did in fact reside in the property for a period of time, the examination is even more complicated.  Compare Sayeed v. Cheatham Farms Master HOA, 2018 WL 4297480 (C.D. Cal. 2018) (analyzing use of property at the time when assessments at issue were incurred) with Haddad v. Alexander, et al 698 F.3d 290 (6th Cir. 2012) (intent of debtor at time of purchase controls).
Most courts have held that fines imposed by HOAs are not “debts” covered by the FDCPA.  See, e.g., Berg v. Ayesh, 2014 WL 2603890 (D. Kansas 2014) (HOA fines not debts under FDCPA); Mlnarik v. Smith, Gardner, Slusky, Lazer, Pohren & Rodgers, LLP, 2014 WL 6657747 (N.D. Cal. Jul. 28, 2014) (fines imposed by HOA did not arise out of “consensual transactions or business dealings, but a unilateral penalty”).  If a fine is not a “debt” than it would follow logically that attorney’s fees and costs incurred while attempting to recover the fine also would not be covered.  At least one court, however, has suggested that an HOA fine may qualify as a “debt” subject to the FDCPA.  See Agrelo v. Affinity Management LLC, 849 F.3d 944 (11th Cir. 2016).
Are You Engaged In “Debt Collection” Under The FDCPA?
Even where a “debt” is involved, there is still the question of whether you or your law firm are engaged in “debt collection” under the FDCPA.  This may turn not only on what you are saying or doing, but the context in which the FDCPA claim arises.  Again, HOA practitioners who are involved in FDCPA litigation should analyze this issue closely.
The Act does not define the term “debt collection” and the courts have come to different conclusions on what it means.  See Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 460 (6th Cir. 2013) (“Unfortunately, the FDCPA does not define ‘debt collection,’ and its definition of ‘debt collector’ sheds little light, for it speaks in terms of debt collection.”) (citations omitted); Gburek v. Litton Loan Serv. LP, 614 F.3d 380, 384 (7th Cir. 2010) (“Neither this circuit nor any other has established a brightline rule for determining whether a communication from a debt collector was made in connection with the collection of any debt.”).  As discussed below, it is possible that the United States Supreme Court may clarify the issue this term.
Must a communication (e.g., a letter, pleading, or phone call) make an express demand for payment of money on a debtor in order to constitute “debt collection” under the FDCPA?  The Ninth and Tenth Circuits have held said “yes” a collector is not engaged in “debt collection” under the FDCPA unless the challenged communication makes a demand for payment of money.  See, e.g., Ho v. ReconTrust Co., NA, 840 F.3d 618, 621-623 (9th Cir. 2016) (mailing notice of default and notice of sale to debtor, which threatened foreclosure, was not attempt to collect money from debtor, and thus was not “debt collection” under FDCPA; “The notices at issue in our case didn’t request payment from Ho.”); Obduskey v. Wells Fargo, 879 F.3d 1216, 1221 (10th Cir.) (following Ho; “Because enforcing a security interest is not an attempt to collect money from the debtor, and the consumer has no “obligation . . . to pay money,” non-judicial foreclosure is not covered under FDCPA) (citations  omitted), pet. for cert. granted, 138 S. Ct. 2710 (2018).  These cases arose in the context of non-judicial foreclosures. 
Other circuit courts, however, have held that a communication may amount to “debt collection” under the FDCPA, even without a demand for payment of money on the debtor.  See, e.g., McCray v. Federal Home Loan Mortg. Corp., 839 F.3d 354, 360 (4th Cir. 2016) (“nothing in [the] language [of the FDCPA] requires that a debt collector’s misrepresentation [or other violative actions] be made as part of an express demand for payment or even as part of an action designed to induce the debtor to pay.”) (citation omitted); Gburek, 614 F.3d at 386 (letter offering to discuss “foreclosure alternatives” was attempt to collect a debt: “Though it did not explicitly ask for payment, it was an offer to discuss Gburek’s repayment options, which qualifies as a communication in connection with an attempt to collect a debt.”); Glazer, 704 F.3d at 461 (FDCPA applied to judicial foreclosure complaint, despite absence of any allegation that it made a demand for payment of money on debtor: “Thus, if  the purpose of an activity taken in relation to a debt is to ‘obtain payment’ of the debt, the activity is properly considered debt collection.”); Kaltenbach v. Richards, 464 F.3d 524, 526-28 (5th Cir. 2006) (attorney who filed foreclosure action may be “debt collector” under FDCPA, despite absence of any allegation that attorney made demand for payment of money).
The Supreme Court may bring some clarity this term when it hears the Obduskey case. The Court is expected to address in Obduskey whether the FDCPA applies to communications made in connection with non-judicial foreclosure proceedings. The decision in Obduskey may also clarify whether communications that do not include a request for payment from the debtor are subject to the FDCPA.
Are You A “Debt Collector” Under The FDCPA?
Even if you are engaged in “debt collection” relating to a “debt” that is subject to the FDCPA, there may be an open issue on whether you or your firm qualify as a “debt collector” under the statute.  Once again, there is no clear test for making this determination.  In the even a suit is filed, this analysis should be done with respect to each named defendant. 
The FDCPA applies to any “debt collector” which the Act defines as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”  15 U.S.C. § 1692a(6) (emphasis added).  There is no question that law firms and attorneys may in certain cases qualify as “debt collectors” under the Act.  See Heintz v. Jenkins, 514 U.S. 291, 294 (1995).
As with many things in FDCPA jurisprudence, the courts have not developed any bright line test for determining what term “principal purpose” or “regularly” means under the Act.  Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1513 n. 5 (9th Cir. 1994) (“principal purposes” of firm was debt collection when made up 80 percent of firm’s practice); See James v. Wadas, 724 F.3d 1312, 1317-18 (10th Cir. 2013) (discussing factors used to determine whether attorney or law firm “regularly” engages in debt collection such as to qualify as a “debt collector”).  Generally speaking, however, if collection work is a small portion of your own practice, or your firm’s overall practice, then it makes sense to closely analyze whether you qualify as a “debt collector” under the statute.  See Reyes v. Julia Place Condominium HOA, 2017 WL 466359 (E.D. La. 2017) (law firm did not “regularly” collect debts where collection was a small fraction of firm’s work). 
FDCPA Risks Relating To The Balance You Are Collecting 
HOA attorneys face significant FDCPA risks relating to the balances they seek to collect on behalf of their clients.  These risks relate to the way that the balances are described by attorneys, particularly if the balances may change in ways that are difficult for attorneys to predict.  The risks also relate to errors in the data that have been supplied to attorneys by their clients.
You would think that it is safe to accurately list the exact balance due as of the date of a collection letter.   If a balance is going to increase, however, do you need to explain this to the debtor, and if so, how can you do so safely?  Debt collection attorneys have been sued for implying that an increasing balance was static. See Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016) (letter stating the “current balance” as of the date it was mailed falsely implied the balance was static).  The Avila Court held that stating the “current balance”in a letter may be misleading under the FDCPA unless the collector also makes clear to the debtor that the balance will increase.  Id. at 77.
Collectors have also been sued under the FDCPA, however, for failing to disclose that a static balance is not increasing. See Taylor v. Financial Recovery Services, Inc., 886 F.3d 212 (2d Cir. 2018) (collection letter stating “balance due” need not state the balance was static).  Although the Taylor court soundly and persuasively rejected the notion that collector is obligated to disclose when a balance is not going up, other circuits have not yet addressed the issue.
Theproblem with accurately describing the balance is not new.  The Seventh Circuit in Miller v. McCalla,Raymer, Padrick, Cobb, Nichols,& Clark, L.L.C., 214 F.3d 872 (7th Cir.2000), tried to address the problem when it fashioned“safe harbor” language that can be usedin that circuit to describe the “amountof the debt” in circumstances where the account balancevaries from day to day.The Miller safe harbor language states: “As of the date of this letter, you owe $ ___ [the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection.  For further information, write the undersigned or call 1-800- [phone number].” Id. at 876.
The safety of this “safe harbor” language, however, is now an open question, because collectors have also been sued for using the Miller “safe harbor” language.  See Boucher v. Finance System of Green Bay, Inc., 880 F.3d 362 (7th Cir. 2018) (“debt collectors cannot immunize themselves from FDCPA liability by blindly copying and pasting the Miller safe harbor language without regard for whether that language is accurate under the circumstances.”).  Thus, collection attorneys should not use the Miller language in situations where it would make a letter inaccurate.
You cannot accurately describe the balance if your client has provided you with inaccurate data to collect.  Bad balance data puts you and your firm at risk under the FDCPA.  See, e.g., Calleja v. Cannon, 2017 WL 362695 (D. Ariz. 2017) (law firm violated FDCPA where HOA applied payments improperly).  Common FDCPA claims filed against attorneys who have sought to collect an inaccurate balance arise under section 1692e of the FDCPA, which prohibits collectors from using false, deceptive or misleading communications, and section 1692f of the FDCPA, which prohibits any false representation regarding the character, amount or legal status of any debt. 
If the balance information provided by your client is wrong and you get sued, you may be able to invoke the “bona fide error” defense under section 1692k(c) of the FDCPA.  This defense allows you to avoid liability if your firm has procedures in place that are reasonably adapted to avoid errors.  If your client has consistently sent data that you know to be inaccurate, however, this increases your FDCPA risks and casts doubt on any bona fide error defense.  See Reichert v. National Credit Servs., Inc., 531 F.3d 1002 (9th Cir. 2008); see also Reed v. ASAP Collection Services, 2018 WL 3392101 (N.D. Cal. 2018) (“highly unlikely” that BFE defense will prevail in light of number of times balances were misstated). 
When you seek to collect attorney’s fees for your HOA clients, this can also present FDCPA risks, as this is a frequent target for consumer and their attorneys.    Courts have come to different conclusions on whether specific requests for attorney’s fees violate the FDCPA.  See, e.g., Allison v. McCabe Trotter, 2018 WL 3826674 (D.S.C. 2018) (OK to file notice of lien seeking fees that had not been approved by court); McNair v. Maxwell & Morgan, PC, 893 F.3d 680 (9th Cir. 2018) (application for judicial foreclosure writ stating attorney’s fees “are now” due violated FDCPA); Carpenter v. Alessi & Koenig, LLC, 2013 WL 5234253 (D. Nev. 2013) (plaintiff failed to prove attorney’s fees sought by defendant’s notices were unreasonable); Lott v. Vial Fotheringham, LLP, 2017 WL 4558050 (D. Or. 2017) (FDCPA violated where CCRs did not allow interest on attorney’s fees).
Filing Suit In The Correct Venue
Are you suing in the right courthouse?  HOA attorneys also face risk relating to their choice of venue in which to initiate legal actions against consumers. 
The “venue” provisions of the FDCPA says that any collector “who brings any legal action on a debt against any consumer shall – (1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or (2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity – (A) in which such consumer signed the contract sued upon; or (B) in which such consumer resides at the commencement of the action.”  15 U.S.C. § 1692i(a). 
The appropriate “judicial district” to bring a “legal action” is the smallest district recognized by the state court system in which the firm initiates the action.  See Olivia v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 864 F.3d 492 (7th Cir. 2017).  This may differ with the requirements of state venue law, so HOA attorneys must be careful to ensure that their suits also satisfy the FDCPA’s venue statute.
If you are facing a wrong venue claim, consider whether your legal action is “against” the consumer.  Courts have generally held that garnishment actions are “against” the garnishee, not the consumer.  See, e.g., Ray v. McCullough Payne & Haan, LLC,838 F.3d 1107,1111 (11th Cir. 2016) (affirming order dismissing claim under section 1692i against law firm; garnishment proceedings not “against” consumer under Georgia law); Jackson v. Blitt & Gaines,P.C., 833 F.3d 860, 864 (7th Cir. 2016) (same result under Illinois law); Hageman v. Barton, 817 F.3d 611, 617-18(8th Cir. 2016) (same); Smith v. Solomon & Solomon, P.C., 714 F.3d 73, 74-76 (1st Cir. 2013) (same result under Massachusetts law); Randall v. Maxwell& Morgan, P.C., 321 F. Supp.3d 978, 981-984(D. Ariz. 2018) (same result under Arizona law); Muhammad v. Reese Law Group, 2017 WL 4557194,at *7 (S.D. Cal. Oct. 12, 2017) (same result under California law).  You should look to your state’s garnishment laws for guidance. 
Overshadowing Risks
The concept of “overshadowing” can be particularly frustrating for HOA practitioners, because it is a judicially-created doctrine that can vary from circuit to circuit.  What exactly is “overshadowing” under the FDCPA?  Broadly speaking, it starts with understanding the notice requirements of section 1692g of the FDCPA, which must be provided by collectors with their initial written communication with consumers.  It is not sufficient for collectors to simply provide the section 1692g notice.  Collectors must also avoid “overshadowing” the notice by stating or doing anything during the 30-day validation period that would tend to contradict the notice or that would confuse a consumer regarding their section 1692g rights. 
Overshadowing can be a huge challenge for HOA attorneys who must also comply with notice obligations required by state law.  Once again, court have reached different results when evaluating overshadowing claims in this context.  Compare Mashiri v. Epsten Grinnell & Howell, 845 F.3d 984 (9th Cir. 2017) (notice stating “Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property” overshadowed section 1692g notice) with Mahmoud v. De Moss Owners Association, Inc., 865 F.3d 322 (5th Cir. 2017) (no overshadowing; letter stated nonjudicial foreclosure would occur unless payment made “on or before the expiration of thirty (30) days from and after the date hereof”).
The “overshadowing” case law is unpredictable, and can vary widely from situation to situation and from circuit to circuit.  For example, the Ninth Circuit found no overshadowing when an attorney made an implied threat of litigation during the validation period.  See Terran v. Kaplan, 109 F.3d 1428, 1430 (9th Cir. 1997) (attorney letter stating “we may find it necessary to recommend to our client that they proceed with litigation” did not overshadow).  By contrast, the Third Circuit in Caprio v. Healthcare Revenue Recovery Grp., 709 F.3d 142 (3d Cir. 2013), held that a request for a consumer to “please call” the collector overshadowed the section 1692g notice.  Given the wide variety of potential risks, HOA attorneys should closely review the communications they make and collection practices they employ during the 30-day validation period.
Risks Presented By Violation Of State Laws And Compliance With State Laws
HOA attorneys are obligated to be vigorous advocates for their clients, and they must ensure that they perfect their client’s rights under the laws and procedures of the states where they practice.  It would be reasonable for HOA attorneys to believe that they can avoid liability under the FDCPA if they are simply sending notices that are required by state law, but unfortunately this has not always been true.  See, e.g., Salewske v. Trott & Trott P.C., 2017 WL 2888998 (E.D. Mich. Jul. 7, 2017) (FDCPA claims based on notice of foreclosure sale that was required by state law); McDermott v. Marcus, Errico, Emmer & Brooks, P.C., 911 F. Supp. 2d 1, 71 (D. Mass. Nov. 20, 2012) (FDCPA claims based on sending notice to mortgagee required by state law). 
Consumer attorneys will not hesitate to seize on real or imagined violations of state procedural law and try to “make a federal case out of it” under the FDCPA.  See, e.g., Lowe v. Maxwell & Morgan, PC, 2018 WL 4693532 (D. Ariz. Sept. 27, 2018) (rejecting argument that law firm was required to follow state law procedures for posting a bond before proceeding with garnishment).  Even where state law has been violated, however, the mere failure to comply with state law does not by itself always establish an FDCPA violation.  See Wade v. Regional Credit Ass’n, 87 F.3d 1098 (9th Cir. 1996) (sending collection notice without maintaining license required by state law did not violate FDCPA).