Property owners, and their agents, seeking to collect overdue rent during and after tenancy may have questions concerning the legality of their debt collection practices.

The Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”) is a federal law that protects consumers. The FDCPA defines a “debt collector” as “any person … in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” If a “debt collector” seeks to collect a debt, they must abide by the numerous terms of the FDCPA, including without limitation, only contacting the debtor during certain time periods, not contacting the debtor at their place of employment, and providing certain required information in conjunction with or shortly after initial collection communications with the debtor.

A property owner (or their own staff), as originator of the debt, would not be considered a “debt collector” under the FDCPA. Questions arise, however, when a property owner utilizes a third-party property manager and/or attorney to collect debts on behalf of the property owner. In one case, courts ruled that a particular property manager did not fall within the definition of a “debt collector” because the property manager and property owner had an existing fiduciary relationship under which the property manager had a fiduciary obligation to collect monthly rents on behalf of the property owner before the tenant was in default. 428 F. Supp. 2d 1260 (M.D. Fla. 2006). In another court case where the property owner only hired a management company to collect the overdue rent after the tenant was in default under the terms of the lease, a Florida court in Sanz v. Fernandez, 633 F. Supp. 2d 1356, 1362 (S.D. Fla. 2009) found that the management company was a “debt collector” under the FDCPA.  Accordingly, if the property manager and property owner have an agreement whereby the property manager routinely collects monthly rent on behalf of the property owner before the tenants are in default, it is likely that the property manager would not be considered a “debt collector” under the FDCPA.

Questions also arise concerning attorneys who attempt to collect a debt on behalf of the property owner. Whether such an attorney would be considered a “debt collector” under the FDCPA turns on whether the attorney “regularly” engages in debt collection or debt collection is the “principal purpose” of their business. If a property engages an attorney for debt collection, the attorney should be able to disclose if they are considered to be a “debt collector” under the FDCPA and they should be aware of the applicable limitations.

In addition to the FDCPA, the Indiana Deceptive Consumer Sales Act, I.C. § 24-5-0.5 et seq. (“IDCSA”), protects consumers from deceptive or unconscionable sales acts related to consumer transactions at the state level. The definition of a “consumer transaction” under the IDCSA explicitly includes “the collection of or attempt to collect a debt by a debt collector.” In turn, a “debt collector” under the IDCSA incorporates the definition of “debt collector” under the FDCPA. However, the IDCSA definition of “debt collector” explicitly excludes “a person admitted to the practice of law in Indiana if the person is acting within the course and scope of the person’s practice as an attorney.” The IDCSA enumerates certain acts which are considered deceptive under the IDCSA, including a violation of the FDCPA by a debt collector. Accordingly, a violation of the FDCPA could result in a separate violation of Indiana’s IDCSA.

Property owners are advised to collect their own debts. Alternatively, if using a property manager or attorney to collect its debts, a property owner must take care to ensure that its agent either does not constitute a “debt collector” under the FDCPA or IDCSA or that its agent complies with the numerous terms of the FDCPA and IDCSA.