UNITED STATES OF AMERICA
September 9, 1992
David L. Masters
Dear Mr. Masters:
David Medine asked me to respond to your letter requesting an informal staff opinion regarding the Fair Debt Collection Practices Act ("FDCPA" or "Act"). I apologize for the delay in responding. As I understand it, the fact situation about which you inquire is the following. Your law firm represents a homeowners' association. All of the homes within the boundaries of the association are subject to a declaration of protective covenants. One requirement of the covenants is that the homeowners pay an association assessment. Those who purchase homes within the association's boundaries sign no contract specifically obligating them to pay the assessments. According to your letter, however, the new homeowners "become obligated for the assessments by accepting deeds subject to the declaration of protective covenants."
The homes in question are located in Gunnison County, Colorado. The association's business office is in Montrose County, Colorado. The association's members (the homeowners) reside in approximately 23 states and several foreign countries. Your law firm has filed suit in Montrose County against a number of association members for past-due assessments. You ask whether your firm has complied with the FDCPA venue provisions in bringing such actions.
The threshold issue is whether your firm is a "debt collector" for purposes of the FDCPA. The Commission staff's Commentary on the Fair Debt Collection Practices Act (copy enclosed) states that the term "debt collector" does not include "[a]n attorney whose practice is limited to legal activities (e.g., the filing and prosecution of lawsuits to reduce debts to judgment)." Thus, if your firm performs only legal activities and does not perform activities traditionally associated with debt collection, such as sending demand letters (dunning notices) or making collection telephone calls to consumers, it probably is not a debt collector and the FDCPA probably does not apply to its activities.
If, however, your firm is a debt collector, the next issue is whether the FDCPA permits the firm to file suit in Montrose County. Section 811 of the FDCPA states that
Your firm does not wish to file suit in the many states where the association members reside.
Association members sign no contract in which they specifically agree to pay the association assessments. The obligation to pay the assessments instead comes with title to the property. The members tacitly "agree" to pay the assessments at settlement when they sign the contract, pay the purchase price, and accept title. We believe, therefore, that it is at settlement that the new homeowners effectively "sign[ ] the contract sued upon." Accordingly, it is the opinion of the Commission staff that your firm may bring suit against a homeowner for past-due assessments in whichever judicial district the homeowner's settlement was held.
The views expressed herein represent an informal staff opinion. As such, they are not binding on the Commission. They do, however, reflect the staff's current enforcement position.
Thomas E. Kane