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CASE ALERT: Violation of the FDCPA Results in $600,000 Judgment

Earlier this year, a Nevada jury awarded a homeowner $614,091.04 in damages against a collection agency. This amount included over $460,000 in actual damages, and nearly $150,000 in attorney fees.

The plaintiff homeowner was part of a homeowners association. A dispute arose with the association’s collection agency as it pursued the collection of maintenance fees and additional costs. The agency filed multiple liens on the property and threatened foreclosure.

The homeowner filed a lawsuit alleging that the agency’s conduct was in violation of the Fair Debt Collection Practices Act.

The Fair Debt Collections Practices Act (“FDCPA”) is a federal statute that establishes legal protection for consumers from abusive debt collection practices. The FDCPA applies to debt collectors, which are broadly defined as persons who regularly collect or attempt to collect consumer debts for another. Law firms, like our office, who attempt to collect debts on behalf of a community association, are considered debt collectors and are bound by the rules of the FDCPA.

In Melinda Ellis v. Alessi Trustee Corporation, et al, a federal jury found the association’s collection agency liable for violations of the FDCPA and held that the agency acted in an extreme and outrageous manner.

Under the FDCPA, creditors and debt collectors must refrain from the following behavior: using rude, harassing, abusive, or oppressive language in an attempt to collect a debt; threatening legal action that is not actually legal or that will not be taken; representing or implying that an individual is an attorney or is communicating on behalf of a law firm; publishing a list of debtors; and/or exaggerating the amount of debt owed.

The Ellis case demonstrates how essential it is for an association to hire competent and knowledgeable collection counsel. As law firm debt collectors are held to the same standards under the FDCPA as ordinary debt collection agencies, it is vital that associations trust their legal counsel to follow the letter of the law.

While this case demonstrates potential claims against an association’s collection case by effectively inviting FDCPA allegations to be brought, such a move can also cause the postponement of the association’s collection on the delinquency.

Many times, even when a valid debt is owed, debtors attempt to raise FDCPA counterclaims to delay the collection process. Our firm ensures that all collection action is taken without violating the FDCPA. We understand the limitations of the FDCPA and can also defend frivolous allegations that are brought to delay the collection process.

Should you have any specific questions about how the FDCPA can affect association foreclosures, please do not hesitate to contact one of the attorneys in the office.

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