late-payment-1360x860Until now, failing to make timely assessment payments could lead to additional charges for late payment fees, interest charges, collection fees, and may even result in the filing of a lien against your property and foreclosure of the recorded lien. However, delinquent assessments rarely show up in the member’s credit report, unless the debt becomes a matter of public record (e.g., an assessment foreclosure) or the debt is reported to the credit bureaus by a collections agency.

While residential in character, operating a community association is still a business. In fact, the Community Association Institute reported in its 2014 Statistical Review that of the approximately 333,000 community associations in the United States, community associations and property management companies collect approximately $70 billion in assessment payments each year. Until now, a member could miss a $30.00 minimum credit card payment and be penalized with a lower credit score, but if that same member was thousands of dollars delinquent in his or her assessment payments, it would not negatively affect their credit score, unless formal collections actions are taken by the association, such as turning over the delinquent account to a collections agency which reports the debt to the credit bureaus or a judgment of foreclosure is ordered against the owner. Well, this great injustice is about to change.

Typically, reporting debts to credit reporting agencies requires membership to the credit bureaus. This is a strict and costly process. However, it is sometimes possible for community association related debts to appear on a member’s credit report because the credit reporting agencies have employees which comb the public records for this type of information, including accounts with collections agencies, civil money judgments, and foreclosures. Once this debt appears on the member’s credit report, their credit score is severely lowered by as much as 300 points in the case of an assessment foreclosure.

Until recently, late assessment payments did not affect a member’s credit report or credit score. However, non-traditional credit data sources, including community association assessment payments, will soon begin to regularly appear on credit reports, and a missed payment will negatively affect credit scores. Equifax Inc. (“Equifax”), one of the three major credit reporting agencies, has recently entered into an agreement with Sperlonga Data & Analytics (“Sperlonga”), a data aggregation business for non-standard credit data sources, and will soon take into account community association assessment payments.

Homeowners who are late on assessment payments should expect to see a negative effect on their credit report and credit score. Similarly, homeowners who make timely assessment payments may soon see a positive effect on their credit report and credit score. A test run of the new community association assessment reporting will begin in August 2016 with full reporting planned for October 2016.

As stated by Matt Martin, chairman and founder of Sperlonga, “Until now, HOA payments have gone largely unreported to the national credit reporting agencies. Our service will help elevate association payments to the same level of importance as the consumer’s other financial obligations like residential mortgages, auto loans and credit card payments. Property owners that pay HOA fees on time should begin to see the similar impact to their credit reports as they would with other payment obligations traditionally found in a credit report, while associations and property management companies should begin to see reduced delinquencies and improved cash flow. Our goal is to empower homeowner associations and management companies with the same credit reporting tool that banks and lenders already use to manage consumer debt and credit-related payments.”

Mike Gardner, senior vice president and sales leader at Equifax, has stated, “Equifax is committed to providing consumers with additional means for building their credit histories. Introducing new sources of data beyond what has traditionally been found on credit files can provide additional insight into a consumer’s financial behavior and help deliver expanded credit access.”

Critics of the new community association assessment reporting argue that assessments are not the same types of debt as mortgages or other loans because associations do not provide financing for purchased goods, they provide property maintenance and services only. In this instance, the critic’s arguments of this new aspect to credit reporting is completely meritless. Simply put, if a member does not want to see their credit score go down, then they should pay their assessments on time. This type of credit reporting is long overdue and should be welcomed by community associations throughout Florida and the rest of the United States.

Jeffrey Rembaum, Esq. of Kaye, Bender, Rembaum attorneys at law, legal practice consists of representation of condominium, homeowner, commercial and mobile home park associations, as well as exclusive country club communities and the developers who build them. He is a regular columnist for The Condo News, a biweekly publication and was inducted into the 2012, 2013 & 2014 Florida Super Lawyers. He can be reached at 561-241-4462.

  1. Justme says:

    How are HOA and Management Companies going to accurately report delinquent payment on dues, when membership in a Homeowner’s Association does have any requirement or legal right to the homeowner’s social security number.

  2. Peggy West says:

    This should be used as a useful tool from a “business” approach for the Boards of the HOA and Condo Associations. Many Boards find it hard to approach their neighbors to pay their fees but the reality is that if the resident/neighbor does not pay it, in the end, the paying residents will end up paying for the delinquent neighbors. It is the fiduciary responsibility of the CAM’s, the CAB’s and the Boards to retrieve any delinquent funds, unfortunately, how unpleasant as it may be. Being on the Board is being a part of running a business. The CAM’s and CAB’s know this and can encourage using this tool. But what about the “Self-Managed” associations? There are approximately 40% self-managed associations in Florida and this could be a very useful approach if used wisely. These delinquent accounts/residents can adversely affect communities prohibiting loans and/or meeting the general needs of the communities they reside in. This new business approach to reporting delinquent assessments should make the Board Members feel more comfortable to enforce this as a policy to use knowing it is an industry practice. At minimum, a warning given that this practice of reporting to a credit bureau will take place may inspire communication from the delinquent neighbor to pay up, then ultimately the community delinquencies to be reduced.
    LM Funding can assist HOA and COA associations in writing a good Collection Policy besides our other services of funding and collecting, without the communities paying the attorney fees.
    If we can be of any service to communities in writing a Collection Policy, feel free to contact your LMF area Marketing Director for this free service. Peggy West-Palm Beach Marketing Director 561-666-0427

  3. K.T. Levenbook says:

    How will Sperlonga get the private records about assessment payments and delinquencies? Sperlonga, “a data aggregation business for non-standard credit data sources,” will want to link to the financial records of Homeowner’s Associations and management companies to mine those records for information. Carefully check and read the privacy policy of Sperlonga as to what use they may make of the financial records once they get them and to whom they can distribute that information. Their 2016 website removed the privacy policy that was on the 2012 website. Will homeowners who are late with their payments, sometimes for excusable reasons, get advertisements for mortgages, loans, etc.? Will homeowner’s associations give up the power to control when Sperlonga passes the information on to Equifax?

    Sperlonga is apparently, based on the information on its website, a subsidiary of another company that deals in online record collection.

    Who will be liable for errors in reports to the credit bureaus? The answer is for a homeowner’s association and a management company to have a clear collection policy for failure to pay assessments and to enforce that collection policy stringently pursuant to the appropriate statutes. Judgments, liens, and foreclosures which are public legal actions, are already included in credit reports.

    When a mistake appears on one’s credit report, Equifax, and the other credit reporting agencies, already require that the person contact the source of the negative information and request that source to correct the error. How will a person pursue that correction?

    Homeowner’s associations and management companies should be very careful when considering this matter.

    • theSCH says:

      As a former board treasurer, I think this is a great idea and agree it’s long overdue. I hope TransUnion and Experian consider this as well, because different creditors report to different agencies.

      As for K.T’s comments, you’re correct that HOAs should have a clear collection policy and follow it consistently. I think one way to address your concerns would be for the HOA board to have the attorney send the information to the credit bureau. By then, the homeowner has likely received two or three warning letters from the Association and has had time to make it right or have any errors corrected. In our community, the attorney gets the account if it’s over 60 days delinquent. Homeowners get a copy of the collection policy every year with the upcoming year’s association budget and they can request an account statement at any time.

      At some point, people need to behave like adults and not let things pile up to where they get out of hand. I was always willing to work with homeowners who’d had a bad patch, like job loss, but the key is communication – if you don’t say anything, one has to assume they don’t want to pay and therefore bad stuff is bound to happen.

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