Texas property owners who have been hounded by their Homeowners Association or its lawyers for unpaid dues, assessments, and fines may wonder whether any consumer protection laws exist to give them legal relief against abusive or harassing HOA debt collection practices. The answer is “yes,” but not all such laws are created equal.
The Texas Fair Debt Collection Act (“TDCA”) is intended to be a state law counterpart to a federal statute, the Fair Debt Collection Practices Act (“FDCPA”). Both laws are targeted at curtailing the use of unfair, abusive, and deceptive practices to collect debts from consumers. While the Texas version is supposed to offer broader protection to consumers, in general, both statutes address similar conduct and offer similar remedies, including a private cause of action that the consumer can bring against the debt collector for violations. However, the differences between the two acts—and how they have been interpreted by the courts—could produce very different outcomes depending on which one the consumer uses in response to the practices of their Homeowners Association.
A Short Overview: The FDCPA vs. the TDCA
Under the FDCPA, 15 U.S.C. § 1692 et seq., a consumer is defined as “any natural person obligated or allegedly obligated to pay any debt.” A debt is defined 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, whether or not such obligation has been reduced to judgment.” Lastly, a debt collector is “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.”
The TDCA, codified in Texas Finance Code 392.001-392.404, defines a consumer as “an individual who has a consumer debt.” It then specifies a consumer debt as “an obligation, or an alleged obligation, primarily for personal, family, or household purposes and arising from a transaction or alleged transaction.” The TDCA then offers two definitions for debt collectors—one for “debt collector” and another for “third party debt collector.” A “debt collector” under the TDCA is “a person who directly or indirectly engages in debt collection and includes a person who sells or offers to sell forms represented to be a collection system, device, or scheme intended to be used to collect consumer debts.” A “third party debt collector,” on the other hand, is defined as “a debt collector, as defined by 15 U.S.C. Section 1692a(6), but does not include an attorney collecting a debt as an attorney on behalf of and in the name of a client….”
How Does Each Act Handle HOA Fees?
Under the FDCPA, HOA fees are “debts”. Ladick v. Van Gemert, 146 F. 3d 1205 (10th Cir.1998). Not only that, but HOA members are considered “consumers” protected by the FDCPA. Thies v. Law Offices of William A. Wyman, 969 F. Supp. 604 (S.D. Cal. 1997). Interestingly enough, the Association itself is not considered a debt collector as long as it is acting on its own behalf, but when it turns over member debts to a law firm, then that law firm may qualify as a debt collector if collecting debts is a regular part of its practice. Fuller v. Becker and Poliakoff, 192 F. Supp. 2d 1361 (M.D. Fla. 2002).
Under the TDCA, the analysis is comparatively straightforward. In short, a Texas court found that HOA assessments and associated fines and fees do not “arise from a transaction” and thus do not constitute “consumer debt.” Green v. Port of Call Homeowners Ass'n, 2018 WL 4100855, at *10 (Tex. App.—Austin Aug. 29, 2018, no pet.). Out of the definitions discussed above, it appears that the term “debt” under the FDCPA would be the most similar to the term “consumer debt” under the TDCA as they both require the debt to arise from a transaction. Yet, the Texas statute yields the complete opposite result of its federal counterpart with respect to its applicability to HOA fees.
Final Considerations
Note that even if the federal act may offer protection in some cases to HOA members, the cases discussed above all come from other states interpreting the federal statute. While it is generally possible to assert a claim under the FDCPA in a Texas state court, to our knowledge, no court has issued an opinion squarely deciding that the federal act does apply to attempts to collect HOA fees. What appears certain, however, is that the Texas act is not available at all to challenge an HOA’s debt collection efforts. If you are considering legal action against your Homeowners Association for abusive debt collection practices, it is important to contact an experienced attorney who can help you determine what laws might be available to protect you.
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