COLLECTIONS AND THE RESIDENT DEBT DISPUTE

You send out a Notice of Intention to Impose a Claim on Security Deposit due to resident damages. The resident writes you a letter disputing the charges and calling you every name in the book. You write a letter back explaining your charges and tell the resident that if they don’t pay, you are going to send the account to collections, and it will affect their credit. Sounds reasonable, right? You just violated the Florida Consumer Collections Law. The penalty? Actual damages PLUS additional statutory damages of up to $1,000.00, together with court costs and reasonable attorney's fees incurred by the resident. This is serious business, and attorneys are out there just waiting for you to violate the law.

History of the Law -- Most managers are familiar with or have heard of the Fair Debt Collections Practices Act, the FDCPA. These are the Federal Laws that govern “debt collectors”. When you send a file to a collection agency, the agency must follow these laws or they and you could be subject to penalties if the FDCPA is violated. Since the FDCPA applies only to “debt collectors”, the manager usually does not have to worry about compliance to a great extent, as at least for now, a owner or a property manager is for the most part not considered a ”debt collector” under the FDCPA. A “debt collector” under the FDCPA is more closely defined as someone who collects delinquent debts of another. The purpose of the FDCPA was to create laws to curb abuses by debt collectors who sometimes threaten and harass debtors. As you can see, the FDCPA governs debt collectors, but what if you are collecting a debt that is due to you? If you are collecting rent, you are considered an “original creditor”, thus you are not a “debt collector” as defined by the FDCPA, but you are not off the hook yet. An original creditor is governed by Florida Statutes Consumer Collection Act Section 559.

Florida Statutes and the Original Creditor-- Florida Statutes Section 559 governs not only debt collectors as does the FDCPA, but also governs the original creditor. This would be the owner or the property manager. This article will examine only one specific section of the Florida Consumer Collection Law and how it applies to the owner or property manager.

Security Deposit Disputes-- After a resident vacates the premises; the manager is required to send the resident the Notice of Intention to Impose Claim on Security Deposit according to Florida Statutes 83.49. The receipt of this required notice by the former resident is the single largest cause of disputes. Many residents simply disagree with the amount that the manager has claimed from the security deposit and make it clear to the owner or property manager in the form of a letter. This letter is a “dispute” by the resident.

Common Practice-- Upon the manager’s receipt of a dispute letter by the former resident, the manager may or may not respond to the resident in writing. A typical response by the manager is an explanation of why the manager charged the resident, and the letter tries to justify the amount charged. Although not required by law, and not recommended by us, sending a letter to the resident explaining or justifying the charges is not illegal in any way. Often the owner or property manager sends out a demand letter to the resident specifying the charges owed and telling the resident that if these amounts are not paid by a specific time or arrangements are not made, the debt will be sent to collections and potentially affect the resident’s credit. This is where the problem begins.

Threatening to send a debt to collections -- Threatening to send a debt to collections is NOT illegal. Threatening to send a “disputed” debt to collections is NOT illegal. Threatening to send a “disputed” debt to collections without telling the debtor that the debt will be sent as a “disputed” debt is completely illegal under Florida law. Unfortunately this happens all the time. The manager sends out the Notice of Intention to Impose Claim on Security Deposit, the former resident disputes, and the collection letters go out just like that. Violations of Florida Statutes occur every day, and more and more attorneys are keenly aware of the law regarding this.

The Penalties Sending the debtor a letter stating that they will be sent to collections or that their credit may be affected WITHOUT telling the debtor that the fact that the “debt is disputed” will be disclosed to the collection agency or credit reporting agency triggers a penalty of up to $1000.00 per occurrence, and in the event an attorney has sued the manager, the attorney will be entitled to an award of attorney’s fees and costs, which could far exceed the $1000.00. If an attorney thinks you may have done this to many debtors, the attorney may just decide to file a class action lawsuit against you, which could cost tens if not hundreds of thousands of dollars in defense, penalties and attorney’s fees of the attorney filing the lawsuit.

SAMPLE WORDING ON ANY CORRESPONDENCE AFTER YOU GET A DISPUTE

We are in receipt of your letter disputing the debt of $(INSERT AMOUNT). Our collection agency and anyone else inquiring about your creditworthiness shall be notified of your debt as a “disputed debt”.

Practical Considerations

1. Never forget to use the word “disputed debt” when telling the debtor that the debt will be sent to collections.
    
2. Never threaten to affect someone’s credit report.
    
3. Send your collection agency a certified letter informing them that the debt is “disputed”, and keep a record of this in the file.
    
4. If someone inquires about the debtor’s creditworthiness or delinquency, always disclose that the debt is disputed.
    
5. Try to settle disputes to avoid litigation.

 

FLORIDA CONSUMER COLLECTION PROHIBITED PRACTICES

559.72 Prohibited practices generally.--In collecting consumer debts, no person shall:

1. Simulate in any manner a law enforcement officer or a representative of any governmental agency;

 

2. Use or threaten force or violence;

 

3. Tell a debtor who disputes a consumer debt that she or he or any person employing her or him will disclose to another, orally or in writing, directly or indirectly, information affecting the debtor's reputation for credit worthiness without also informing the debtor that the existence of the dispute will also be disclosed as required by subsection (6);

 

4. Communicate or threaten to communicate with a debtor's employer prior to obtaining final judgment against the debtor, unless the debtor gives her or his permission in writing to contact her or his employer or acknowledges in writing the existence of the debt after the debt has been placed for collection, but this shall not prohibit a person from telling the debtor that her or his employer will be contacted if a final judgment is obtained;

 

5. Disclose to a person other than the debtor or her or his family information affecting the debtor's reputation, whether or not for credit worthiness, with knowledge or reason to know that the other person does not have a legitimate business need for the information or that the information is false;

 

6. Disclose information concerning the existence of a debt known to be reasonably disputed by the debtor without disclosing that fact. If a disclosure is made prior to such reasonable dispute having been asserted and written notice is received from the debtor that any part of the debt is disputed and if such dispute is reasonable, the person who made the original disclosure shall reveal upon the request of the debtor within 30 days the details of the dispute to each person to whom disclosure of the debt without notice of the dispute was made within the preceding 90 days;

 

7. Willfully communicate with the debtor or any member of her or his family with such frequency as can reasonably be expected to harass the debtor or her or his family, or willfully engage in other conduct which can reasonably be expected to abuse or harass the debtor or any member of her or his family;

 

8. Use profane, obscene, vulgar, or willfully abusive language in communicating with the debtor or any member of her or his family;

 

9. Claim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate or assert the existence of some other legal right when such person knows that the right does not exist;

 

10. Use a communication which simulates in any manner legal or judicial process or which gives the appearance of being authorized, issued or approved by a government, governmental agency, or attorney at law, when it is not;

 

11. Communicate with a debtor under the guise of an attorney by using the stationery of an attorney or forms or instruments which only attorneys are authorized to prepare;

 

12. Orally communicate with a debtor in such a manner as to give the false impression or appearance that such person is or is associated with an attorney;

 

13. Advertise or threaten to advertise for sale any debt as a means to enforce payment except under court order or when acting as an assignee for the benefit of a creditor;

 

14. Publish or post, threaten to publish or post, or cause to be published or posted before the general public individual names or any list of names of debtors, commonly known as a deadbeat list, for the purpose of enforcing or attempting to enforce collection of consumer debts;

 

15. Refuse to provide adequate identification of herself or himself or her or his employer or other entity whom she or he represents when requested to do so by a debtor from whom she or he is collecting or attempting to collect a consumer debt;

 

16. Mail any communication to a debtor in an envelope or postcard with words typed, written, or printed on the outside of the envelope or postcard calculated to embarrass the debtor. An example of this would be an envelope addressed to "Deadbeat, Jane Doe" or "Deadbeat, John Doe";

 

17. Communicate with the debtor between the hours of 9 p.m. and 8 a.m. in the debtor's time zone without the prior consent of the debtor;

 

18. Communicate with a debtor if the person knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address, unless the debtor's attorney fails to respond within a reasonable period of time to a communication from the person, unless the debtor's attorney consents to a direct communication with the debtor, or unless the debtor initiates the communication; or cause charges to be made to any debtor for communications by concealment of the true purpose of the communication, including collect telephone calls and telegram fees.