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How We Collect
Community Associations' Money
The following was
written for a Community Association client, but it applied to all Community Association collection [procedures] and
can be informative for Board Members:
The Association determines a deadline for property owners’
delinquency, say 6 months in arrears (at the outset many cases were much older if the Association had not previously used
a collection agency).
Our agency receives the transmittal of a debtor or debtors. BCA then searches various sources such as
the credit bureau (Experian) for address updates, place of business or current telephones. The information is entered into
BCA’s computer. It is assigned an agency number and information is added such as amount, date of delinquency, date assigned
to BCA, our client’s account or Lot number.
Interest is added and updated periodically, as allowed by law.
The debtor
is sent a notice advising that payment is due the community association. That letter carries the federal Fair Debt Collection
Practices Act (FDCPA PL 95-109) disclaimer advising them that they have 30 days to dispute the debt in writing. This period
does not preclude us from contacting the debtor providing we don’t trample their 30 rights, i.e. “demand”
the money or use “immediately” or “now”, action words that shorten their 30-day window.
If we receive a new address, we reset the clock and forward a new 1st notice.
After 30 days we are free
to contact the debtor in reasonable intervals or on the telephone during reasonable hours 8AM-9PM seven days a week. Our letters
are designed to educate the debtor as to the inconvenience and additional costs he will incur should he ignore his obligation
as well as the damage to his credit standing if he is a candidate to have it entered on his Experian national credit
file.
Along
the way, when monthly payments are received by BCA Financial Services, they are deposited into our trust account until our
statement disbursement goes out to the association before the 10th of the following month.
Any “direct”
(to the offices of the association) payments are reported by association staff and they appear on that same monthly combined
“net” statement.
Most importantly, while collection is proceeding we rely on the Association’s credit
staff; to provide us with anything from itemized billing to previous disputes or promises. They process and answer every question
that our office asks. In turn, we stand ready to answer any collection question that may help with the Association’s
internal collection efforts.
When all effort is exhausted, a derogatory notation regarding the debt is placed on debtor's
credit file (except in the case of a written dispute) and the association is notified that suit is recommended to effect collection.
At this juncture, the Association may determine on a case-by-case basis which accounts they will chose to sue.
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The Standards of BCA Financial Services We pride ourselves on understanding the problems and
opportunities in the collection industry. We believe our clients are the most important asset of our company, and we are dedicated
to serving your needs.
For Treasurers / Property Managers:
Pennsylvania and New Jersey
Community Associations continue to thank us for prompt results on past due accounts entrusted to us for collection
These
clients will save unnecessary administrative expense while returning the formerly charge-off “losses” to the bottom
line.
Some of the benefits of our collection
agency: 1. Reduce
bad debt losses. 2. Faster
recovery / Improved Cash Flow 3. Collection
personnel relieved for other duties.
4. Lesser burden on
paying members.
BCA Financial Services has been making it
possible for associations to achieve similar results.
We never charge a fee unless we collect money.
Pennsylvania Statute of Limitations
According to our Pennsylvania attorney, the statute of limitations for Community Association assessments is only
Three (3) years!
While this may not preclude us from requesting and collecting all of the money owing to
your association, if we must secure a Judgment against a delinquent debtor in court; the law will only allow us the three
years according to statute.
Be careful not to hold delinquent accounts too long, they won’t be worthless but
they’ll be worth less!
New Jersey statute: 6 Years.
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Pennsylvania Statute of Limitations
- Assessed Fees of Planned Communities
A Statute of Limitations is a rule mandated by the Commonwealth
of Pennsylvania which defines limits to the amount of thime in which a suit can be filed.
68 Pa C.S.A. ~5315(e)
explains that the statute of limitations for actions with respect to assessed fees collected by Planned Communities is limited
to three years from the date the assessment becomes payable.
This rule differs from some other types of contract
actions to collect debts where the statute of limitations is four years.
Approximate
Court Costs in Pennsylvania
As you may already know, PA costs vary by Court and
DJ (District Justice) offices. DJ costs (matters under $8,000) typically run between $100 and $150 and Common Pleas
costs (cases over $8,000) can be found on most county websites but is typically around $200 plus or minus.
Approximate Court Costs in New Jersey
New Jersey Court
Costs (For District Court-Special Civil Part) run about $85.00 for claims up to $2000.00 and $100.00 for claims from
$2001.00-$14,999.00. Cases over $15,000.00 (Superior Court) run about $350.00. These costs are enough for filing,
summons service, etc.
Approximate Court Costs in New York
Costs run about $225.00 for a consumer claim and about $225.00 for a commercial
claim.
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Unpaid Dues…A Free Ride?
Unpaid dues and assessments are a constant burden on property owners associations and a major headache for
managers and board members.
The property owner who expects a free ride by ignoring his financial obligation to the association
is, for all practical purposes, passing his debt on to his neighbors. This is the net effect, for the unpaid bill must be
absorbed and paid by the (increased) dues on the paying members.
If
allowed to go unchecked, this problem will result in a severe financial crunch as well as widespread irritation among the
paying members.
Paying
members demand and deserve nothing less than equitable sharing of the burden. In my personal experience as a professional collection agent, I was asked
to attend an open board meeting a few years ago and the opening remark from a member in attendance was “What
are you doing about the members who aren’t paying?” The answer, of course, should be “...prompt and continuing attention to the slow
payers and professional help on the seriously delinquent who are not coming forward with an effort to pay.” Such professional help may be 1) a professional collection agency, experienced
in this area of collection or 2) an attorney. Bear in mind that an attorney’s actions (especially, if not specializing
in this field), may be confined to writing a letter and suing for judgment. Also, consider that an attorney’s overhead,
being greater than that of a collection agency, necessitates fees and advanced costs greater than that of a collection agency.
While admitting to prejudice in this regard, I believe a collection agent
on the other hand will familiarize himself and his staff with the constitution and by-laws and can rationally and patiently
refute most of the standard excuses offered by delinquent members. An agency can also, if networked with the American Collectors
Association, pursue and even refer for suit, any debtor anywhere in the country. And, most important, an
agency will work on a contingent fee basis (no collection-no fee).
Bear in mind, however, that time is every debtor’s ally. The longer a debtor is allowed
to ignore a debt, the more factors against successful collection pile up; such as marital status, health or income problems,
changes of address (usually leaving no forwarding address) and, of course, the mental attitude that comes from having gotten
way with it for so long. The delinquent
member who is brought current promptly, will probably remain as a paying member versus the long delinquent member whose obligation
has piled up beyond his willingness or ability to pay and who thus becomes a drop out who completely defaults and has to be
sued.
John Debold Managing Partner BCA Financial Services
We are dedicated to our clients. We believe in one word: excellence. We think this commitment shows in all our products and
services.
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NY, NJ, PA
- "Legal Rate" of interest
New Jersey, New York and Pennsylvania also have a "legal
rate." In such states, as a general rule, if you have a contractual obligation that provides simply
for interest without a specific term, or "interest at the highest legal rate" then the "legal rate" applies.
There is also a "judgment rate." That's
the rate that final judgments bear. In states without a usury limit, there still may be a federally imposed limit because
at certain very large rates of interest.
NEW YORK, the legal rate of interest is 9%; the general usury limit is
16%.
PENNSYLVANIA, the legal rate of interest is 6%, and this is the general usury limit for loans below $ 50,000,
except for: loans with a lien on non-residential real estate; loans to corporations; loans that have no collateral above $
35,000. Judgments bear interest at the legal rate. It is criminal usury to charge more than 25%.
NEW JERSEY, the
legal rate of interest is 6%; the general usury limit is 30% for individuals, 50% for corporations. There are a number of
exceptions to this law.
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BCA Financial Services Operating Procedures and Confidentiality Statement
I personally supervise all aspects, in this office, of the operating procedures and confidentiality necessary
to comply with all state and federal laws.
A new privacy law went into effect on January 1, 2006 on which I attended a seminar in November
2005. Part of the law involves the confidentiality of debtors’ Social Security numbers as well as the proper security
and destruction of records.
As far as our operating
procedures, our first concern is the compliance with the federal law, the Fair Debt Collection Practices Act. P.L. 95-109.
After a standard acknowledgment
of a claim to your company, debtor is notified that a third party collection agency is attempting to collect a debt. They
are advised of their (Miranda, as it has become known) rights to dispute the debt.
After the time limit
(30 days) has elapsed, we attempt verbal contact while continuing mail communication, advising [them] of the consequences
of advanced collection procedures as allowed by law as ultimately directed by you, the individual client.
John Debold
BCA Financial Services
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