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How to Avoid Violating Fair Debt Collection Practices

Creditors’ Rights & Commercial Litigation

How to Avoid Violating Fair Debt Collection Practices Act When Trying to Collect Member Debts


Jay Nussbaum
Berlandi Nussbaum & Reitzas LLP

When a member doesn’t pay her monthly assessment or other money she owes the association, it’s often up to the manager to try to collect what’s owed. But a manager can inadvertently run into trouble when trying to collect a member debt. A federal law- the Fair Debt Collection Practices Act (the Act)-govems what a manager may legally do. And it’s easy to violate the Act without realizing it. We’ll explain how the Act applies to managers, and what they must do to comply with it. Check with your attorney before implementing any of the suggestions given here, because many states have their own debt collection laws that managers must follow also.

Who Must Comply with Act?

The Act was passed to bar “debt collectors” from harassing debtors. It applies to anyone who regularly collects or attempts to collect debts owed to someone else, says California attorney Jon H. Epsten. lt doesn’t apply to a creditor that’s trying to collect its own debts-for example, an association that sends a member a demand for a past-due assessment. Does the Act apply to managing agents of community associations? There are conflicting opinions on this issue, says California attorney Sandra Gottlieb. She

knows of one case where the manager was found liable for failing to comply with the Act but has seen other cases turn out differently. Many times it depends on what a court thinks of the facts of the particular case. So the safest course for all managers to take is to comply with tbe Act, says Gottlieb.

What Collections Are Covered by Act?

The Act applies only to situations where the member is a person, not where it’s a corporation, partnership or trust, or other entity, says Epstcn. So if the association is seeking to collect an association debt from, say, a corporation that owns a unit in the community, it needn’t comply with the Act, he points out. Also, some federal courts have ruled that community association assessments aren’t “debts” at all. If your association is located in a part of the country covered by these federal court rulings, the Act doesn’t apply to efforts to collect a past-due assessment from a member. Check with your attorney to learn more about

the law in your locality.

Penalties for Violating Act

The penalties for violating the Act can be harsh. First, the member is entitled to what’s called ” actual damages. “This includes not only any financial loss the member can prove but also things like emotional distress and slander. In fact, to win a case under the Act, the member doesn’t have to prove financial damages at all. Second, the member can collect up to $1 ,000 in what’s called “additional damages.” If the debt collector is sued in a class action (which is a lawsuit brought by many people who claim to have been harmed by the same person in the same way), the debt collector could have to pay $1 ,000 to each person suing it, up to $500,000 or l percent of the debt collector’s net worth, whichever is less. Because many managers pursue hundreds of debts at a time, the possibility of being sued in a class action is quite real, warns California attorney Debora Zumwalt. Gottlieb knows of one association manager who was sued in a class action and had to pay $229,000. Finally, the member can collect her attorney’s fees and any costs.

PRACTICAL POINTER: One violation is all that’s needed to be potentially liable under the Act, says Epsten. The member doesn’t have to prove repeated violations or an ongoing course of inappropriate conduct.

How to Comply with Act

Here are I 0 dos and don’ts for complying with the Act:

  1. Disclose intentions to member in your first communication with her. In the debt collector’s first communication with the member, whether it’s by telephone or letter, he must say that he’s calling or writing to collect a debt and that any information he obtains will be used for that purpose. Then, in all subsequent communications, the debt collector must say that he’s calling or writing to collect a debt.  Epsten suggests adding the following statement to all initial letters: “This is a communication from a debt collector attempting to collect a debt, and any information obtained will be used for that purpose.” And he suggests adding the following statement to all subsequent letters: “This is a communication from a debt collector.
  2. Don’t contact member at unusual time. A debt collector shouldn’t contact the member to talk about the debt, either before 8:00 AM or after 9:00 PM or at any other time he knows to be inconvenient for her, unless she has given written permission to do so.
  3. Don’t contact member at work. If a debt collector knows that the member’s employer prohibits her from accepting personal calls at work, he may not call her there. Sometimes the debt collector isn’t sure if the employer has such a policy. In that case, it’s better  to err on the side of caution and not call the member at work. If the member provides a work number as a contact number for communicating about the debt, it’s okay to call her there, says Gottlieb.
  4. Deal with member’s attorney if she has one. If the member is represented by an attorney with regard to the debt- for example, if the member has declared bankruptcy-the debt collector must deal directly with the attorney. The debt collector is allowed to deal directly with a member who’s represented by an attorney only if her attorney fails to respond within a reasonable amount of time to his attempts to contact her, or if the attorney gives written permission to deal directly with the member.
  5. Don’t continue to contact member if she refuses to pay debt and says to stop calling and writing. If the member refuses to pay the debt and tells the debt collector that she wants him to cease communications with her, he must stop. At that point, he may contact the member only to tell her:
    1.  That he’ll no longer be trying to collect the debt;
    2. That he’s considering other options and what those options are; or
    3. Specifically, what he’s going to do-for example, bring a lawsuit against her to collect the debt. say or imply that he has started a lawsuit if he hasn’t. Nor should he say anything else that’s misleading, warns Zumwalt. The Act forbids any false, deceptive, or misleading communications. And the test a court will use to decide whether a communication was misleading is to decide whether the communication would mislead the least sophisticated person, she says.
  6. Don’t do anything that would harass member. The Act specifically says that debt collectors may not do anything that would have the natural effect of harassing, oppressing, or abusing the member. Among the types of behavior to avoid, according to Epsten, are using obscene or abusive language, publishing a list of delinquent members in the community newsletter, threatening violence, making an excessive number of calls, or sending an excessive number of letters.
  7. Include validation notice in first written communication, or send one within five days of first oral communication. A validation notice must accompany the debt collector’s first written communication or be sent within five days of his first oral communication, says Gottlieb. A validation notice is a written document that states the amount of the debt, the name of the creditor, and the following three legally required statements:
    1. Unless the member disputes the debt within 30 days of receiving the validation notice, the debt collector will assume that the debt is valid.
    2. lf the member notifies the debt collector in writing within 30 days of receiving the validation notice that the debt isn’t valid, the debt collector will get verification of its validity and mail that verification to her. (This verification will usually be backup data from the association or its management company, says Gottlieb.)
    3. For validation notices involving a creditor that isn’t the original creditor, the debt collector must also state that he’ll provide the member with the name and address of the original creditor if the member requests it in writing within 30 days of receiving the validation notice. If the member requests either verification or the name of the original creditor, the debt collector must suspend all collection activity until he gives her that information.
  8. Don’t have conversations with anyone but debtor or debtor’s attorney. With the exception of the association’s board members and attorney, a debt collector isn’t allowed to talk about the debt with anyone but the debtor or the debtor’s attorney. Debt collectors are often contacted by people other than the member to talk about the debt. Most of the time, these calls are perfectly legitimate, such as when an adult child of an elderly member calls. But unless the member has said it’s okay, a debt collector may not talk about the member’s debt with anyone other than the member or her attorney. If the debt collector gets a call from someone else, he should politely tell the caller that he’s not at liberty to discuss the matter, but if the member wants to give him permission to do so, the caller should have her write a letter to that effect. For the same reason, if the debt collector calls the member and has to leave a message, either with a person or on an answering machine, he shouldn’t mention that the call has to do with collecting a debt, advises Zumwalt. As far as the community newsletter is concerned, if the manager and not the association publishes it, the manager shouldn’t publish the names of members who are the subject of debt collections.
  9.  Debt collectors may contact someone other than member to find out where member is. If a debt collector is trying to locate the member, he can contact anyone he thinks might know the member’s whereabouts. But he must follow five rules:
    1. He must identity himself;
    2. If asked, he must identity his employer;
    3. He must state that he’s calling to confirm or correct location information about the member;
    4. He mustn’t mention that the member owes a debt; and
    5. He mustn’t contact the person more than once  unless the person asks him to or unless he feels that the information the person gave him is wrong or incomplete and the person now has the correct information. But if the debt collector knows that the member is represented by an attorney with regard to the debt, he can ‘t contact other people for location information, says Epsten.
  10. Don’t use envelopes that indicate correspondence is from debt collector. The Act prohibits debt collectors from marking their envelopes with anything that would expose the fact that the correspondence is from a debt collector. Most likely it’s okay to have the name of the management company or the company’s logo on the envelope, as long as it doesn’t imply that the Jetter has to do with a debt, says Epsten. But, for example, don’t include in the return address the words “Collection Department” or similar wording, he says. Also, the Act prohibits corresponding with the member by postcard.


• Fair Debt Collection Practices Act: 15 USC §§ 1692a-1692e


Guidelines When Asking Job Applicants About Drug and Alcohol Use

Employment & Labor Law

Follow Federal Guidelines When Asking Job Applicants About Drug and Alcohol Use

Jay Nussbaum
Berlandi Nussbaum & Reitzas LLP

What can you ask a job applicant about drug and alcohol use without facing a discrimination lawsuit? You must be very careful if you have 15 or more employees. (The law doesn’t apply to companies with fewer than 15 employees.) While you want a workplace free of drug- and alcohol-related problems, the Americans with Disabilities Act (ADA) bars companies with 15 or more employees from discriminating against the disabled, including those who are recovered or recovering alcoholics or drug addicts. It’s easy to fall into a trap and ask the wrong questions. And if you do, you could be held liable for damages. In 1999, Wal-Mart had to pay $ 157,500 for asking improper questions [Equal Employment Opportunity Commission v. Wai-Mart Stores, Inc.). Using an Oct. I 0, 1995, memo issued by the Equal Employment Opportunity Commission (EEOC), we’ll help you identify the questions you can legally ask job applicants about drug and alcohol use. The memo indicates that a very fine line exists between questions that are okay and those that could get you into trouble. To help you screen job applicants without violating the ADA, we’ll tell you what the memo says about drug and alcohol-related questions. We’ve also put together a chart separating the good questions from the bad ones (seep. 6).

Dont Ask Questions About Drug or Alcohol Disabilities

Having employees who don’t use drugs and alcohol on the job is of prime importance to community association members and managers, notes Larry Niemann, general counsel to the Texas Apartment Association. Employees who use drugs and alcohol on the job are more likely to cause accidents and create problems with members.

But in your zeal to find out about an applicant’s drug or alcohol use, don’t ask questions about disabilities, that could put you in the wrong. TI1e ADA makes it illegal to discriminate based on a job applicant’s disability, and recovered drug addicts and alcoholics are considered to have a disability under the ADA. You can’t deny them employment because of their past condition. The same is true of recovering drug addictsthose who are enrolled in a rehabilitation program. Current

alcoholics are also considered disabled whether or not they are in a rehab program, says Niemann. As a general rule, you can’t ask any question that’s likely to bring out information about a disability, including past drug addiction or past or present alcoholism. These questions don’t belong on an application and shouldn’t be asked in an interview. An employer

can ask disability-related questions or require a medical exam only after it has made a ” real” job offer. The EEOC considers a job offer to be “real” only if the employer has evaluated all nonmedical information it reasonably could have obtained before making the offer. (The offer can sti II be contingent on an applicant’s answering disability-related questions and/or passing a medical exam.) Even a job applicant who isn’t disabled has the right to sue you for asking the wrong questions [Mack v. Johnstown America Corp.].


Asking About Illegal Drug Use

The memo allows you to ask a job applicant if he or she currently uses illegal drugs. Someone who currently uses illegal drugs isn’t protected by the ADA. If an applicant admits to currently using illegal drugs, you can also ask which drugs, says Chris Kuczynski, A.D.A. Policy Director for the EEOC.  But asking about an applicant’s prior illegal drug

use gets you into a delicate area. You may not ask questions that are likely to bring out information about past addiction to illegal drugs or controlled substances, because past addiction is considered a disability. But past casual use isn’t considered a disability. That means you may ask about an applicant’s casual use of drugs in the past (for instance, “Have you ever used illegal drugs?”). But you can’t word a question so that the answer would reveal whether the applicant was ever addicted to drugs (for instance, “Have you ever been addicted to drugs?” or “Have you ever been treated for drug addiction or abuse?”). And if an applicant answers yes to “Have you ever used illegal drugs?”- you can’t ask about the extent of the applicant’s past drug use.

Asking About Legal Drug Use

The EEOC memo says that you can’t ask employees about prior or present legal drug use, unless the question is “innocuous” and won’t bring out information about a disability. Many questions about legal drug use are likely to bring out information about a disability (for instance, “What medications are you currently taking?” or “Have you ever taken AZT?”-AZT is an AIDS drug). questions are innocuous and unlikely to bring out information about a disability. For example, if the applicant volunteers that she’s coughing and wheezing because of her allergies, you can mention a medication that you’ve found helpful for your allergies and ask the applicant if she’s tried it.

Asking About Alcohol Use

You can’t ask questions that are likely to bring out information about alcoholism, which is a disability, whether past or present. You can ask an applicant whether she drinks alcohol or whether she has been convicted for driving under the influence, because these questions don’t reveal alcoholism. But asking an applicant how much she drinks is likely to

bring out information that could reveal alcoholism.

Asking About Convictions

The EEOC memo says that under the ADA you can ask applicants about their conviction records because these records aren’t likely to bring out information about a disability. You can specifically ask if the person has ever been convicted of driving under the influence of alcohol. According to Kuczynski, you can also ask whether a person has ever been convicted for the use or sale of illegal drugs.  And you can ask applicants whether they’ve ever sold illegal drugs or whether they currently sell illegal drugs, says Kuczynski. Dealing drugs isn’t a disability, he notes. The EEOC memo says that under the ADA, employers may ask applicants about arrest records. But our legal experts warn that asking about arrest records can get you into trouble under other federal law and the laws of many states. They recommend that you not ask about arrests.

Drug Testing Rules

The EEOC memo says that you may test applicants to determine whether they currently use illegal drugs. But check with your attorney to determine whether your state allows you to require applicants to submit to drug testing. If you test for drugs and get a positive result, you can ask the applicant questions about what legal medications he or she was taking that could account for the result.

Alcohol Testing Rules

The EEOC memo bars you from testing job applicants for alcohol, because alcohol testing is considered a medical test. Note that EEOC rules allow you to test someone for alcohol only after you’ve made the person a job offer contingent upon passing the test. +


Whats OK, Whats Not OK

Based on the EEOC memorandum. here’s a guide to the questions you can and can’t-ask prospective employees about drugs and alcohol before you decide whether they’re qualified for the job. Most of these questions were taken directly from the EEOC memo.

  • Do you currently use illegal drugs?
  • If you do. what illegal drugs do you currently use?•
  • Have you ever used illegal drugs?
  • When was the last time you used illegal drugs?
  • Have you used illegal drugs in the past six months?
  • Have you ever been convicted for any drug- or alcohol-related activity?•
  • Have you ever engaged in the sale of illegal drugs?*
  • Do you currently engage in the sale of illegal drugs?•
  • Do you drink alcohol?
  • Have you ever been convicted for driving under the influence of alcohol? •
  • If you test applicants for drugs and a test result is positive. you can ask the applicant the following:
  • What medications have you taken that might have resulted in this positive test result?
  • Are you taking this medication under a lawful prescription?


  • What medications are you currently taking?
  • Have you ever taken (name of legal drug)?
  • How often did you use illegal drugs in the past?
  • Have you ever been addicted to drugs?
  • Have you ever been treated for a drug addiction?
  • Have you ever been treated for drug abuse?
  • How much alcohol do you drink?
  • Have you ever participated in an alcohol rehabilitation program?

Follow Federal Guidelines When Asking Job Applicants About Drug and Alcohol Use 


• Americans with Disabilities Act: 42 USC § 12101 er seq. (1990).

• Equal Employment Opportunity Commission v. Wai-Mart

Stores, Inc.: 202 F.3d 281 (U.S. Ct. App. 10th Cir. 1999).

• Mack v. Johnstown America Corp.: No. CIV A. 97-325J, 1999

WL 304276 (U.S. Dist. Ct. W.O. Pa. 5/12/99).

C 2004 by Vendome Group, LLC (formerly Brownstone Publishers, Inc.). For more in~tion calll-800-643-8095 or visit liii’YII’N.br0’V”11Stone.corn

Mortgage Lender Error

Commercial Real Estate, Mortgage Financing, Law

Jay Nussbaum

Berlandi Nussbaum & Reitzas LLP

Mortgage Lender Error

When boxing promoter Don King used to crow, “Only in America,” it was a hopeful, if self-serving, proclamation that anything is possible in America for those dedicated to improving their stations in life. Unfortunately, in today’s America, in the wake of the historic mortgage industry implosion of 2008 that served to tear the mask off the banking industry only to reveal a well-capitalized Barney Fife running things, that same statement serves as a grim warning that can, and probably someday will, bumble its way into your financial world too.

Case in point: Our firm recently handled a foreclosure defense that was entirely bank-driven. The ludicrous story began when our client’s lender initiated a letter to our client stating that the client ‘might be eligible for a mortgage modification’ on his condominium apartment in Manhattan. Our had no need for a mortgage modification, but as any logical businessman would do under the circumstances, he figured there was nothing to lose by taking the bank up on its offer and submitting an application. Remember those words: “nothing to lose”.

Immediately after his application was submitted, he was told by the bank that, because he now had a modification application pending, the bank would no longer accept loan payments on his mortgage. For our client, this didn’t require any action of any kind, because when he first closed on his loan he set up an automatic payment whereby he authorized the bank to simply withdraw funds from his account every month. So the client took no action at all, but the bank—which still had the authority to withdraw monthly payments from the account—elected not to. This would have been fine, if not for the fact that the bank then foreclosed on our client based on those very same “missed” payments. And here’s where it gets really weird.

Two days after the bank foreclosed on our client, it sent him a letter denying his mortgage modification application, and then, a little less than a month later, sent him another letter saying that the bank had not yet made a decision on his mortgage modification application. Only in post-2008 America.

At this point, because of all the conflicting information, the poor man had no idea what was going on or what to do. Was he being foreclosed on by his bank? Was he still being considered for a mortgage modification?

Naturally, he tried calling the bank to find out what was going on. He tried the foreclosure department; he tried the legal department; he tried the mortgage modification department; he even tried the misnomer of all misnomers, the customer service department. No one knew what was going on. No one knew what the department down the hall from them was up to. No one had the authority to make a decision or even to get a decision-maker for him to talk to.

Meanwhile, letters kept coming. Another letter arrived denying his mortgage modification application (again)…followed by FIVE letters, each saying that the application remained under review…followed by two more letters saying the application had been denied…followed by another EIGHT letters saying that it remained under review. (Incidentally, not a single letter was signed by any individual, whom we would’ve been able to call to discuss the matter, nor, we were told, was anyone at the bank able to receive incoming emails. In short, it was not only a tragically dysfunctional system, it seems intentionally designed to be that way.)

My firm fought the foreclosure for nearly two years. For nearly two years, the case crawled phlegmatically through an overburdened court system. My client spent money; the bank spent money. Still, no one ever stepped forward from the bank with any knowledge, authority or interest in discussing the case, explaining what had happened or how to fix things. (Because throughout the case, our client remained financially capable of fixing whatever was wrong, if only someone at the bank would tell us what had caused all of this.)

Finally, we reached the point where a hearing was scheduled to determine whether the bank had even served my client the right way to begin the lawsuit. As a courtesy, we asked the bank’s attorneys to meet with us to talk about the case, and fortunately, by that time, they had hired a law firm that was willing to communicate, unlike the foreclosure mill that had been handling the case up to that point.

We met with them, and demonstrated, point by point, how irresponsibly their client had behaved for the past two years. At the end of the meeting, we offered to let them save face by dropping the case before walking into the hearing on jurisdiction, where they would surely lose.

They accepted our offer, and dropped the case.

So let’s look at the scorecard. The bank sued for foreclosure in October, 2010, for reasons that we have still never learned. Two years have passed. Both sides have paid lawyers. The bank has alienated an affluent, excellent borrower and client. And that bank is, today, in exactly the same place, legally, as they had been in two years earlier, except that they have not received loan payments for almost two years. Today, as I write this, the bank has still refused to engage in any type of substantive conversation with us.

Why? Because the bank is too big, automated and disorganized to make a phone call. Only in America.

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