Do Property Managers Need to Follow the Same Rules as Debt Collectors?

When collecting unpaid tenant rent, have you ever asked yourself if you are required to adhere by the same laws and regulations as debt collectors? And are property managers and landlords technically treated as debt collectors in the eyes of the law? In order to answer these questions, you must look at how the Fair Debt Collection Practices Act (FDCPA) defines “debt” and “debt collector.”

How Does the FDCPA Define “Debt?”

First, the FDCPA 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...”

Does property debt like unpaid rent meet that definition?

In the 1998 case Romea v. Heiberger & Associates, in a historical ruling for the debt collections industry, delinquent rent was officially considered a debt under the FDCPA. But while tenant rent is legally defined as a debt under the FDCPA, this does not answer the whole question of whether or not property managers need to follow the same rules as debt collectors. We must also look at the FDCPA’s definition of “debt collector.”

How Does the FDCPA Define “Debt Collector?”
The FDCPA defines a debt collector 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.” So according to the FDCPA’s definition, a property manager is considered a debt collector if collecting a debt owed to another party. The key words being “another party.” Meaning, if a property manager or landlord is acting as a direct agent of the owner of the property, then he or she would not be considered a debt collector because the debt would not technically be owed to another. In this case the property manager/landlord would not be required to follow the debt collection laws of the FDCPA. However, the FDCPA also states that property managers do become debt collectors (in the eyes of the law) when acting as a 3rd party in pursuit of a debt (delinquent rent). So if a property manager is not a direct agent of the property and is collecting on behalf of the property, they are considered a debt collector and are thus required to follow the laws of the Fair Debt Collection Practices Act.

Lastly, another important distinction in the FDCPA’s definition of a debt collector is the use of the words “regularly collects.” Again, the FDCPA defines a debt collector as any person who regularly collects or attempts to collect debts owed or due or asserted to be owed or due another. So if you outsource your tenant collections to a 3rd party such as a collections professional or attorney, and these outside collectors regularly collect or attempt to collect your delinquent rent, they will be considered debt collectors by law and will be required to follow the rules and regulations of the FDCPA.

To summarize, property managers are exempt from the rules and regulations of the FDCPA when recovering tenant rent on behalf of themselves or their own property. But if a debt is being pursued by an outside party, this “debt collector” is now required to follow the debt collection laws of the FDCPA. 

The information provided in this article does not constitute legal advice and is intended for educational purposes only. © 2015 Hunter Warfield, Inc. All Rights Reserved.
 
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