Fdcpa And Vague “beginning Balance” Descriptions

When Associations switch accounting systems, from one property manager to another, or switch from self-managed to agent-managed, there is usually an ominous “Beginning Balance” on the new accounting. While in theory, this is the most time-effective way to transfer over account histories, it is imperative that the Association keep the beginning balance histories readily accessible for delinquent owners.

The Fair Debt Collection Practices Act (FDCPA) requires that a debt collector provide verification of a debt if the owner disputes the debt. The issue with a “beginning balance” is that this is not a verification of the debt. It is simply a lump sum that provides no detail to the owner about charges or payments. In addition, if there are, for example, enforcement assessments or attorney fees charged to the account, the board or property manager should be able to provide supporting documentation for these charges. If there is an enforcement assessment, the keeper of records must keep the documentation for the reason for the assessment, including the proper statutory notices prior to the fine being imposed on the account. If attorney fees are charged to the account, a Court will require that we provide a detailed itemization of the fees (no matter how old they are or how many attorneys ago it may have been) before the Court will award judgment for attorney fees.

In a recent case out of the US Court of Appeals for the Sixth District, arising out of a dispute regarding maintenance fees for a condominium in Michigan, the Court determined that the property manager’s failure to provide an adequate description for a $50 charge on a beginning balance on an accounting was sufficient grounds to find that both the property manager and law firm violated the FDCPA. In many circuits, a verification has been equated to an itemized accounting, meaning that a “beginning balance” is not sufficient unless there is a prior history in possession of the Association.

Source: Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 2014 U.S. App. LEXIS 13498, 2014 FED App. 0153P (6th Cir.), 14a0153p.06;, 2014 WL 3440174 (6th Cir. Mich. 2014)

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