Court finds Management Companies NOT subject to Fair Debt Collection Practices Act

Published on: May 19, 2010

In a case of first impression, the United States District Court for Minnesota has held that a property management company is not subject to the Fair Debt Collection Practices Act (FDCPA). In Alexander v. Omega Management, Inc., a delinquent unit owner filed an action against the condominium’s management company for allegedly failing to comply with the provisions of FDCPA. This Act requires “debt collectors” to provide certain statutory warnings and rights to debtors when they are seeking to collect a “debt.” During the past several years, Courts have expanded the definition of “debt collector” to include various persons involved in seeking payment from a tenant or unit owner. For example, one Court held that a law firm seeking to evict a residential tenant could be considered a “debt collector.” Debt collectors under the Act must provide the debtor with the right to dispute the debt and various notices.

In Alexander, the Court found that a management company is not a “debt collector” since the collection of delinquent accounts is not its principal purpose. Rather, a management company spends the majority of its resources managing the physical structure of the complex rather than collecting debts. The Court also found that a management company’s collection of common charges comes within an exception to the Act in that the management company was responsible for the account before it came into default. Since the management company was responsible for this account before the “debt” became in default, they were not liable under the Act.

While this decision has no legal precedence in other circuits, it provides some insight into how Courts in this circuit may view this issue.