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UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C.
20580
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Division of Credit Practices
Bureau of Consumer Protection
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September 9, 1992
David L. Masters
Mathis and Masters, P.C.
121 North Park Avenue
P.O. Box 1487
Montrose, Colorado 81402
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
(a) any debt collector who brings any legal action on
a debt against any consumer shall
(1) . . .
(2) . . . bring such action only in the judicial district
or similar legal entity --
(A) in which such consumer signed the contract sued
upon; or
(B) in which such consumer resides at the commencement
of the action.
(b) . . .
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.
Sincerely,
Thomas E. Kane
Attorney
Division of Credit Practices
Enclosure
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