SB 908, the new law that mandates debt collectors obtain licenses through an application process, will cause significant headaches throughout the HOA assessment recovery industry. Behind the scenes, there is an intense debate in the industry about the law's applicability to the collection of HOA assessments. If SB 908 applies to HOA assessment collection, the law will require the licensing of HOA service providers, such as law firms and management companies, that engage in the collection of HOA assessments.
There is some ambiguity about the applicability of the new law to the collection of HOA assessments. In California, some courts have found that assessments are consumer debts covered by the Rosenthal Fair Debt Collection Practices Act, so entities collecting assessments may be subject to the licensing requirements. Other courts have found the opposite, and the lack of clarity on that subject throws the necessity of licensing to collect HOA assessment debts into question.
Attorneys for debtors will, of course, adopt a broad interpretation of the new law and will be champing at the bit to sue unlicensed debt collectors. Most industry service providers would prefer not to be the test case as to whether the law applies to assessment collection. This concern may have led some HOA service providers to abandon assessment collection services altogether, but Kriger Law Firm intends to continue providing this vital service to its clients.
Because of this uncertainty, many HOA service providers are reviewing SB 908 and applying for a license as a precaution. Anyone who applies by December 31, 2021, may continue to engage in the business of consumer debt collection in California pending the approval or denial of their application. While the impacts of SB 908 are still being sorted out, an association's need for assessment recovery will not wait. Please do not hesitate to contact our firm with any questions you may have.