Great news for HOAs collecting delinquent assessments! After over a year of confusion created by Senate Bill 908, which seemed to require that HOAs be licensed to collect assessments, California’s Department of Financial Protection and Innovation (DFPI) decided that routine HOA assessment activities do not require a license.
The DFPI’s website posted FAQs that:
- Routine HOA assessments do not constitute a consumer credit transaction under the Debt Collection Licensing Act (DCLA).
- Routine HOA assessments are not considered consumer debt.
- Collection of assessments does not turn an HOA into an entity engaged in the business of debt collection.
The DFPI decision aligns with recent case law:
The Association is not a debt collector for the purpose of the Rosenthal Act, because the definition of debt collector is premised upon the act of collecting consumer debt. In other words, because the Court finds that homeowner’s assessments are not a consumer credit transaction for the purpose of the Rosenthal Act, it necessarily follows that the Association cannot be a debt collector under that statute (i.e., the Association does not in the ordinary course of business, regularly, on behalf of that person or others, engage in the collection of consumer debt). (Dickson v. Century Park East; internal quotation marks removed.)
What does this mean for HOAs? No license is required for routine assessment collection activities. Even for delinquent collections, the root of the transaction is not an extension of credit. Therefore, no license is required.
The reference to routine includes, “A regular or special assessment and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, if any, as determined in accordance with subdivision (b), shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied.” (Civ. Code § 5650(a).)
In summary, a debt collection license is not required for routine assessment collection activities. Boards should consult legal counsel with any questions about their collection policies and practices.
Many thanks to our partner Melissa Ward for this article
DISCLAIMER. The Davis-Stirling.com Newsletter by ADAMS | STIRLING PLC provides commentary only, not legal advice. For legal advice, you’ll need to hire legal counsel. You can hire ADAMS | STIRLING PLC; Keep in mind they are considered corporate counsel to associations only.