Reporting Past Due Fees to Credit Bureau

Started by FrankN • 12 replies • 4228 views

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FrankN (Texas)
Posts: 15

Posted:

We have about the same property owners who don't pay their fees each year. We've filed liens but that really has no effect and we don't get our money unless the property is sold or refinanced. Foreclosure is my last option. Has anyone reported liens to credit bureaus? We are a rural county so the credit bureaus don't check the county filings. I feel like the threat of damaging one's credit might prompt them to pay.

TracieS (Colorado)
Posts: 460

Posted:

I know NOTHING about this, but I would imagine you probably couldn't. Isn't reporting to a credit bureau for those who extend CREDIT to an individual? Also, to report to the credit bureau, wouldn't you need the owner's SSN?

If you've filed liens, why haven't you gone the next step to foreclosure?

FrankN (Texas)
Posts: 15

Posted:

We try to run a laid-back country POA, foreclosure can cause bad PR, that’s why it’s my last option. It may come to that but I’m trying to explore all other remedies. Thanks for your reply.

JohnO6 (Georgia)
Posts: 424

Posted:

Your post & question got me to thinking about this issue. I know that in order to report to credit bureaus, you must be a business member of the bureau, but I began to wonder if there might be another way to accomplish the same thing. It struck me that collection agencies often report to credit bureaus, but I'm not so sure they're traditionally appropriate for HOAs.

So I did a little searching and came across this web-based service. In order to abide by posting rules here, I'll not disclose the company name and have disguised the website URL by using a tinyurl code instead.

Just go here: http://tinyurl.com/mtchc5

BTW, I have absolutely no connection to this company and cannot vouch for it's claims of effectiveness. But watching the video on their website give a pretty good idea of the service available.

Seems pretty reasonable to me - both the approach and the costs.

RobertG (Arizona)
Posts: 505

Posted:

John, are you saying you never thought of using a collection agency to get money, or did you mean the specific method of the company you referenced?

JohnO6 (Georgia)
Posts: 424

Posted:

RobertG -

No actually we never have .. .. our process has been two letters from the Property Mgmt company and then turned over to our law firm - more letters, lien filed, lawsuit started, judgement obtained, yada - yada - yada.

FrankN (Texas)
Posts: 15

Posted:

John / Robert

Thanks for your info. Looks like reporting to the credit bureaus isn't do-able. I was looking for an option other than foreclosure as HOAs in Texas have gotten bad press for foreclosures. I'll likly need to go that route as I can't let 3 or 4 owners give the finger to the rest of the owners who are paying.

JohnO6 (Georgia)
Posts: 424

Posted:

Hi Frank!

I don't mean to be repetitive, but did you look at the link I provided. Again, I have nothing to do with that vendor and certainly can't vouch for them, but I must say that just on the surface, I'm impressed with their approach and costs.

I know if I were in a financial bind and making decisions about who I could pay (or worse, if I were the kind of person who could afford it, but for some bizarre reason chose to ignore HOA dues), I'd think long and hard about ignoring a bill that would result in my delinquency being reported to all three major credit bureaus each and every month until it was paid .. .. .. Seems like my ability to subsequently garner credit would be severely hampered.

And their approach seems "soft" enough not to go over the foreclosure "tipping point".

Just saying .. .. . .

FrankN (Texas)
Posts: 15

Posted:

John,

Will check out the link, haven't had time yet, day job is taking too much time. Will let you know as to my impressions after I see the link.

Thanks for your help

GloriaL (Georgia)
Posts: 195

Posted:

Quote:

Posted By JohnO6 on 07/09/2009 3:01 PM
RobertG -

No actually we never have .. .. our process has been two letters from the Property Mgmt company and then turned over to our law firm - more letters, lien filed, lawsuit started, judgement obtained, yada - yada - yada.

JohnO6

We are just now in the process of trying to collect delinquent Dues on two HomeOwners. This is the first time that it has gotten to this point (small HOA, just 27 individual homes, VERY little money to spend, HOA/GAPOA only 7 years old).

One HomeOwner was habitually late, sometimes months, but eventually paid...until this year. Now the NOA has sent late notices, then the layers have sent two demand letters and placed a lien. Still nothing collected and absolutely no response from the HO. I gather that our next step is to initiate a lawsuit, which would mean a $1,000. up front expense for the HOA which collects TOTAL $8,900 for the year. That is a lot of money for us.

My questions, JohnO6:
1. how successful have you been with lawsuits and judgements?
2. how much $$ has the HOA had to pay out up front before collection occurred?

We have an attorney, who we pay $1,000 yearly retainer, but it seems that everytime they do anything, we are hit with another bill. $270 per demand letter, $$$ billed when seeking advice on if and how we should proceed with collections, $1,000 for a lawsuit, and nickle and dime items for printing. Our budget is thin to begin with and now legal fees are swallowing us.

I'd appreciate your input,anyone?
Gloria

EverettC (Maryland)
Posts: 90

Posted:

GloriaL,

In some states corporations may be represented in small claims court by an officer or other designated representative. I don't know if that is true of Georgia but do know that it is true in Maryland and in the following selected states:

RI - a corporation with assets of less than $1 million can designate a non-attorney representative

IN - a corporation can be representated by an employee if the claim is less than $1500

TX - a corporation can appear by an officer or an employee

FL - a corporation can appear by an officer or an employee

Even if a non-attorney can appear for the association, you may want to first consult your attorney to get advice on what is needed to prove the case, how to act, what documents to bring, what witnesses to bring, etc. I suggest you check with the small claims court first to see if a corporation (and I have assumed that your HOA is incorporated) must be represented by an attorney in a small claims case. If not, as a practical matter there is probably not much you can do other than to see if you can file liens yourself rather than having the attorney do it. Our HOA has a management company and the property manager prepares and files the lien without involving our HOA attorney.

Keep in mind that getting a judgment doesn't necessarily mean you will collect the money, whether or not an attorney represents the association in the lawsuit. Frequently, post judgment actions (bank attachments, wage garnishments, etc.) are necessary to actually get money from the defendant. This can be even harder than getting the judgment.

The cost to file a GA small claims case depends on the number of defendants, but is under $100 for 2 defendants.

In some states, the number of small claims that a plaintiff can bring in a year is limited. Given the number of homes in your association and the current number of delinquent accounts that you indicated, that would not seem to be an issue for you but may be in other associations that are located in other states.

JohnO6 (Georgia)
Posts: 424

Posted:

Gloria -

We, too, have a law firm on retainer ($1200/yr) and while we are pretty pleased with their work on most Community Association issues (they specialize in HOA practice), we have found their collections practice to be less satisfactory. It becomes even more complicated when there's the additional complexity of needed communication between the PM firm and the law firm. Despite the law firm having what COULD BE a very useful web-based tracking system for their collections practice, our experience has been that the process drags and drags until it seems like it too late to be really effective.

To that point, we have only had to sue one owner. We were successful and received a judgement for the amount owed; but then the owner promptly declared bankruptcy and the home went into foreclosure. Not inlcuding the lost dues, the costs exceeded $1000, but the Board (I was previously on the Board, not now) felt compelled to take those actions as a demonstration of unwillingness to not take action against such owners. However it's a much different scale of magnitude for us as compared to you since our annual budget exceeds $250K.

So .. .. .. our experience hasn't been all that good. Were I to serve on the Board in the future, I think I'd be more in favor of:

1). Standard letters from the HOA
2). Take a collections agency approach (I posted a link in one of my previous messages in this thread that intrigued me)
3). File a lien on the property
4). Finally - go the lawyer/lawsuit/judgement/foreclosure-collections route.

My rationale is:

1). Standard letters are cheap and help establish the legitimacy of the debt (particularly if they use legally permissable debt collection language and disclaimers)
2). The collections agency approach I stumbled upon "seems like" (no experience here admittedly) it should be very effective at a remarably low cost when compared to law firms.
3). The lien at least protects the HOA in the event of sale of the property.
4). The lawyer route is a last resort, that may be more philsophical than effective or cost-effective.

RobertG (Arizona)
Posts: 505

Posted:

Our HOA just voted to take the small claims court route. I am not sure how it is going to turn out, but it is what the board decided. I would hesitate to get the advice of your regular legal counsel unless they don't ever get involved in collections, they probably will state an attorney is required which defeats the savings of dollars. The following is what is done by the Property Management company and their charges. There are prior steps that are used before these steps are imposed that would be common even if an attorney was used.

xxxx
Community Management

Day 45: Demand Letter
Combined Demand Letter is sent to delinquent Homeowner informing them that they have (15) days to contact the Association and make payment or enter into a no-cost payment plan. Failure to contact the Association will result in the filing of a Notice Of Lien against the lot, and transfer of the delinquency to a collection agency for follow up and reporting of the outstanding balance to the (3) reporting bureaus (Equifax, TransUnion and Experian).

Day 60: Lien / Collection Agency
Notice of Lien is recorded with the appropriate County Recorder. Lien is mailed to homeowner. Skip trace is performed using a twenty database system. Collection file is opened on NCS national database software. Collection activities commence which include at minimum, (5) varying collection demands, (9) live phone calls/attempts, and a final attorney demand letter notifying homeowner that their case will be transferred back to the Association for a Small Claims filing, or to a collection attorney for all other filings.

Day 160: Skip Trace and Transfer
Delinquent account is transferred back to Association for Small Claims filing by management team, or reassignment to an outside collection attorney for further action or civil suit.

Day 165: small Claims
Small Claims action is filed against delinquent homeowner and service is made via regular and certified mail. If delinquent homeowner fails to answer within 20/30-day window, application for Default Judgment is made to the court. Upon receipt of signed Judgment it is recorded with the appropriate County Recorder. This will be picked up by the (3) reporting bureaus and appear as a Derogatory Public Record on the delinquent owners credit reports. If delinquent homeowner answers the claim in the Small Claims Division, management team will represent the Association's interests throughout the entire process. If homeowner requests removal to Civil Division or engages counsel, the Association will need to transfer the case to its contracted collection attorney for litigation.

Day 225 -250: Judgment Enforcement
Following the recording of the Judgment, the Association may then pursue enforcement through all means available; including, but not limited to, garnishment of wages and/or bank accounts.

SCHEDULE OF COLLECTION FEES * (May 2009)
Lien / Collection Demand Letter (sent regular and certified mail) $ 40.00
Prepare and File Lien $ 50.00 **
County Recording Fee $ 9.00/ $ 10.00
County Release Fee $ 9.00/S 10.00
Collection Agency Account (includes initial Skip Trace upon opening) $ 13S.00
Skip Trace Report S 40.00
Small Claims Action Filing (sent regular and certified mail) $ 250.00 **
Small Claims Answer Fee (not charged If Default judgment I granted) $ 1SO.00
Transfer Case to Attorney $ 35.00
Record Judgment / Record Satisfaction of Judgment $ 35.00
Lien Release (if Lien was not filed by xxxx) $ 45.00
* All fees added to homeowners delinquency balance when charged to Association
** Certified mailing fee included
$ 9.00 in Maricopa County, $ 10.00 in Pinal County

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