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May 1, 1995 MEMORANDUM TO CLIENTS
COLLECTIONS: LAWS REGULATE MOST ASSOCIATION COLLECTION EFFORTS Why do collection letters appear verbose? Do not blame it on the lawyers! The answer is found in the Federal Fair Debt Collection Practices Act, 15 U.S.C. §1692, et. seq. The Act applies to debt collectors seeking to collect consumer debts. The Federal Act applies to most individuals and entities who are paid to collect money due as the result of household or consumer credit activities. For example, the Federal Act applies to loans for furniture and consumers' cars. Courts have held that the Federal Act applies to those seeking to recover home mortgage payments from a homeowner. Applying the rationale of past court decisions it is likely that the Courts will apply the Federal Act to the collection of assessment installments concerning a resident's condominium or homeowners property. The Federal Act is likely to apply to country clubs collecting greens fees or bar bills from individuals. The Federal Act's expansive nature has been reported for quite some time. Repeatedly associations and consumer businesses have been warned that their management and collection companies seeking to collect delinquent accounts will be regulated as "debt collectors" by the Act. Debt collectors that do not comply with the Act may subject not only themselves to liability, but also the individual company employees undertaking collection efforts and the company or association seeking to collect the debt. Violators of the Federal Act are subject to judgments for compensatory damages and penalties. Though lawyers were originally exempt from regulation, the law was amended to regulate lawyers. Because of the amendment, attorneys in compliance with the Act, including this firm, have included the required disclosures in initial collection letters. Businesses and associations should be aware of persons collecting debts who claim exemption from the Federal Act. The extent of regulation is now a "hot" topic of discussion because of last month's United States Supreme Court decision in Heintz v. Jenkins, Case No. 94-367. The Supreme Court proved a broad, literal interpretation to the Federal Act. Thus, there are few, if any, exceptions to the Federal Act. The Supreme Court's decision validates this firm's collection processes. The firm's initial demand letters have always included the Federal Act's warnings. Despite protests that the additional language would adversely impact collection rates, time proved that the language has no significant impact on collection rates. The firm continues to take appropriate efforts to ensure that correct information is included in all demand letters. Clients are requested to transmit collection information in writing, clearly stating each amount due. Written requests avoid misunderstandings and mistakes, and serve as a double check for clients to verify information before information is transmitted. Care must be taken not to violate the law's prohibitions against misrepresenting a consumer debt or undertaking "unfair or unconscionable means to collect or attempt to collect" a consumer debt. Thus, unless an agreement or an association's bylaws or declaration allow for late charges or accelerated assessments, debt collectors are prohibited from including late charges or accelerated assessments. If an association desires to lien for late charges or accelerated assessments and the "governing documents" do not include explicit provisions allowing these charges, then the association should consult with their association attorney for appropriate amendment provisions. The Federal Act's restrictions on communications may interfere with real estate transactions that are not properly planned in advance. To protect debtors' privacy, the Federal Act generally prohibits communications concerning the amount due to anyone but the debtor (the person owing the money), and the debtor's spouse, parents (if the debtor is a minor), guardian, executor, or administrator. The Federal Act is understood to permit communications to a creditor's agent, such as an association's management company, and to a debtor's attorney. The law has not been extended to permit communications by a debt collector to brokers or title companies. If anyone but a debtor and his or her spouse, parents, children, or attorney seeks information concerning a debt, then the debtor must authorize disclosure of the information. Therefore, most firms that collect debts, including this firm, require title companies and brokers to obtain a debtor's written consent before disclosing information. Title closing agents are requested to contact debt collectors ten business days in advance of a sale to ensure that proper authorizations are timely obtained. CLUBBED INTO SUBMISSION
You know what happens when children abuse discretion, the discretion is removed. The same thing happens in real life. Traditionally private clubs' membership rules are matters in which the courts will not become involved; however, as the Fourth District Court of Appeals noted in The Jupiter Hills Club, Inc. v. Brinsfield, ____ So. 2d ____ (Fla. 4th DCA, 1994), when a club goes over the invisible line, then the courts will intercede on behalf of the member, or member to be. Mr. Brinsfield built a home costing about $400,000 in a country club community. The home was built only upon the Club manager's oral assurances that Mr. Brinsfield and his fiancée would be entitled to a membership. After the home was built, the Club refused to grant the fiancée membership. Instead, the Club offered the fiancée limited "guest" privileges. The Appellate Court refused to endorse the Club's conduct. Though the membership communications were not in writing, it was clear that the Club acknowledged to Mr. Brinsfield that he and his fiancée would be members. Because of Mr. Brinsfield's reliance upon the Club's representation, the Club could not change its mind. Therefore, the Court approved the trial court's order requiring the Club to admit Mr. Brinsfield and his fiancée as members. This decision is significant because the Court overruled a private club's membership process. The reason why is probably based upon two factors: first, the large amount of money Mr. Brinsfield spent; and, second, the fact that the membership issue affected ownership of real estate. The money factor may be unique; however, the club's connection with real property ownership is becoming more common. As homeowner associations recognize, even without any statutory guidance, the courts will regulate private club membership rules that affect real property ownership. The Brinsfield decision notifies clubs that membership panels cannot act arbitrarily, especially if real property ownership issues are at stake. Similarly, the decision reinforces past decisions reminding homeowner and condominium associations that their comments, even if not in writing, may be binding.
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