Balancing the Boardâ€™s Fiduciary Responsibility and Fair Debt Collections
Posted on March 4, 2019 11:43 AM by Melissa Gentry
Categories: Board Member Articles
From time to time you may hear that the board of the association operates in a fiduciary capacity for the homeowners. Or you may read about the board’s fiduciary responsibility in the governing documents. Just exactly what does this mean?
Fiduciary duty simply means the board has an ethical and legal obligation to make decisions in the best interests of the entire association. That’s a small explanation for a very big responsibility.
Fiduciary duty includes a duty of loyalty to the association, which means that board members should never use their position to take advantage of the association. They should never make decisions for the association that benefit themselves at the expense of the association and its members.
Fiduciary duty also includes the duty to exercise ordinary care. This means board members must perform their duties in good faith and in a manner they believe to be in the best interest of the association, with such care as an ordinary prudent person in a similar position under similar circumstances would use.
In short, boards must act in the best interests of the association and act reasonably. In the first quarter of the year, the board makes decisions regarding collections for unpaid assessments.
Our management company advises your board of directors to ensure the board balances their fiduciary responsibility with protection of owners under the Fair Debt Collections Practices Act (FDCPA).
The association makes every effort to work with homeowners who are having problems paying their assessments. But sometimes people get behind anyway. We want our homeowners to know that your association adheres to the Fair Debt Collections Practices Act (FDCPA), and we do not harass homeowners for unpaid assessments.
Community associations are required to collect assessments, which many state and federal courts consider to be debts. The FDCPA requires those who collect debts from individuals—like homeowners in a community association—to refrain from tactics that might be considered invasive. The FDCPA prohibits the association from:
- Harassing owners
- Threatening you with violence or harm
- Publishing names of owners who are delinquent or refuse to pay
- Making false statements
- Misrepresenting the amount owed
- Depositing your post-dated check early
- Threatening to take legal action against you when we don’t really mean it
- Providing personal information to anyone else without the owners permission
The FDCPA also requires the association to notify the owner in writing about delinquent assessments. This correspondence must state that it is an attempt to collect a debt, include the amount of the debt and the association’s name, and it must state that the owner has 30 days to dispute the debt in writing. If an association violates any of these stipulations, it could be liable to the homeowner for damages, attorneys’ fees, and court costs.
For more information about the Fair Debt Collection Practices Act, visit the Federal Trade Commission’s Consumer Information page at www.consumer.ftc.gov/articles/0149-debt-collection.