Sooner or later, a board with a long-overdue account has to decide whether to hand it to someone else. HOA collection services come in two main forms, a collection agency or a collection attorney, and each one works the account under rules the board doesn't get to write.
The board still decides when an account is ready to go, what the owner can be charged for the collector's work, and when to settle or call the account back. For the details that apply to your own community, read the declaration and your state's law.
What HOA collection services do: agencies and attorneys
A collection agency contacts the owner by letter and phone, asks for payment, and reports back to the board. Its contract sets how it gets paid.
A collection attorney can do the same outreach and can also take legal steps an agency generally can't, such as preparing a lien where the governing documents allow one or filing suit. If the next step in the board's policy is a lien or a lawsuit, that's usually attorney work. Deciding whether a step needs counsel at all is its own question, covered in when your HOA needs a lawyer.
The referral checklist
An account goes to an outside collector because it reached the step in the written HOA collection policy that says referral comes next, and the board can show it got there on the same schedule as every other account. Before referral, check these items off:
- The account has passed the age or balance the policy names for referral.
- Every notice the policy requires has gone out, and the file holds a copy and proof of mailing for each one.
- The balance is verified line by line: each assessment, each late fee, each payment, and the date of each.
- The board voted on the referral, or the person the policy authorizes approved it, and the minutes or the file show it.
Verifying the amount is the slowest item on that list. A collector working from a wrong number starts a dispute the association has to unwind.
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Before referral, the board can send one last letter giving a firm date. Plain wording works: "Your account has a past-due balance of [amount]. If it isn't paid, or we haven't heard from you, by [date], the board will refer the account to [collector name]." The earlier stages of that conversation are covered in how to collect HOA dues without the awkward conversations.
Who pays the collector's fees
Collection costs go to the owner only as far as the governing documents and state law allow. Some declarations let the association recover reasonable collection costs and attorney's fees from the owner. Some states add conditions, such as a written notice before those fees can be charged, or limits when the collector's pay depends on what it recovers.
Read the declaration's collection provision and your state's rules before signing with anyone, then compare them to the fee arrangement in the collector's contract. A fee the owner can't be charged becomes the association's cost. Whatever does get passed through goes on the owner's ledger as its own dated line.
Decisions the board keeps after referral
Referral delegates the work. The association is still the creditor, and the board still makes the calls that matter:
- whether to accept a settlement for less than the full balance
- whether to approve a payment arrangement the owner proposes
- when to move to a lien or a lawsuit
- when to call the account back
Write those approval points into the collector's contract. Payments sometimes come straight to the association after referral; post them to the ledger and tell the collector the same day, so nobody contacts the owner about money that's already been paid.
Federal debt-collection rules can apply to the collector
The federal Fair Debt Collection Practices Act governs third-party debt collectors, and its definitions decide whether it reaches a given account. In the FTC's copy of the Act's text, a "debt" comes from a transaction "primarily for personal, family, or household purposes", and a "debt collector" is someone who "regularly collects or attempts to collect" debts owed to another. The definition leaves out "any officer or employee of a creditor" collecting in the creditor's own name.
These rules can apply once an outside agency or collection attorney is collecting for the association, and the association's attorney should confirm how they apply to your accounts. Where they do apply, a few requirements shape how the collector works:
- A written validation notice is due "Within five days after the initial communication with a consumer", and the owner then has thirty days after receiving it to dispute the debt.
- The CFPB's debt collection page says a debt collector must give details such as "the name of the creditor, the amount owed" to the person it contacts.
- The same page tells consumers they can tell the collector if they think they don't owe the amount, and that they have the right to "tell a debt collector to stop contacting you". It also links to a way to submit a complaint.
For the board, the practical effect is that the collector needs accurate numbers from the first letter. If an owner disputes the balance, the backup is the ledger and notice file the board built before referral.
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Questions to ask a collector before signing
Put these to any agency or collection attorney, and get the answers in writing:
- How are you paid, and what will the owner be charged? Ask for the fee schedule.
- Will you follow the steps and approval points in our written collection policy?
- Who approves settlements and payment arrangements?
- How do you handle a dispute from an owner, and how quickly do you tell us about it?
- How often will we get a status report on each account?
- Can owners still contact the board directly while you're working the account?
- What happens when an owner pays the association after referral?
- How do we end the contract and call accounts back, and what does that cost?
Bring the answers and the draft contract to an executive session or an open meeting, as your bylaws require, and record the board's vote in the minutes.
How HOA-OS fits
Before a referral, the board's file is already in HOA-OS: on the Community plan ($49/mo) each unit has a ledger of every charge and payment, late fees apply automatically under the board's rules, reminders go out before and after the due date, and the board can send collection letters from its own templates to one owner or many at once. Letters can be printed and mailed, standard or certified, paid per piece. The Premium plan ($89/mo) adds lien management and tracking plus a Delinquency report the board can view on screen or export to CSV to share with its collector. Plans and the 30-day free trial are on the HOA-OS pricing page.
Sources
- Fair Debt Collection Practices Act, Federal Trade Commission
- Debt collection, Consumer Financial Protection Bureau
Related Reading
- What Happens If You Don't Pay HOA Fees? (And How Boards Should Handle It)
- What Your HOA Management Contract Actually Says
- Can HOA Board Members Be Sued? Liability in Plain English
An account left sitting past its referral step keeps adding assessments the owner hasn't paid, while the notices in the file grow older and the operating budget covers the gap with the other owners' payments.