Summary:
After allegedly falling $314 behind on her homeowners association dues, the HOA retained EquityExperts.org to "aggressively" collect and it eventually ran up costs by an additional $6,035, threatening sale of the property.
Kimberli Lewis brought suit against EquityExperts.org, LLC alleging improper debt collection practices by EquityExperts.org in connection with delinquent homeowners association dues. Lewis's claims were based on violations of the Fair Debt Collection Practices Act (FDCPA), North Carolina Collection Agency Act (NCCAA), North Carolina Debt Collection Act (NCDCA), Unfair and Deceptive Trade Practices Act (UDTPA), and for common law unjust enrichment. She also sought class action certification, damages, and attorneys' fees.
EquityExperts.org moved to dismiss her claims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The court granted the motion in part and denied it in part.
The court found sufficient facts to support Lewis's FDCPA claim, focusing on the allegations that EquityExperts.org misrepresented the immediacy of foreclosure and attempted to collect fees not authorized by law or the association's covenants., following the 6th Circuit in holding that "the FDCPA prohibits collection of costs that exceed 'actual costs of collection,' or costs that are unreasonable or excessive beyond any relation to the value of the principal amount of the debt." Sparks v. EquityExperts.org, LLC, 936 F.3d 348, 352 (6th Cir. 2019). The claims under the NCCAA and NCDCA were also allowed to proceed, based on similar reasoning applied to the FDCPA claim.
However, the court dismissed the stand-alone UDTPA claim, concluding that the allegations did not independently indicate "egregious or aggravating circumstances" beyond those necessary to support the other statutory claims. The unjust enrichment claim was also dismissed, as the court found that the payments made by Lewis did not constitute unjust enrichment.
The court denied the motion to strike class action allegations, indicating that it was not clear from the complaint that class certification requirements under Rule 23 could not be met.
Commentary:
Start of course with the observation that most Homeowners Associations are evil.
Secondly, this case and the holding that legal fees and collection costs violate the FDCPA if "unreasonable or excessive beyond any relation to the value of the principal amount of the debt", may also be relevant in bankruptcy. For example, when a mortgage servicer seeks $1,200 in attorneys fees for completing Proof of Claim for a debtor who is not delinquent on the mortgage, those fees might not only be unreasonable and subject to disallowance, but also could, subject to Midland Funding, LLC v. Johnson, give rise to counterclaims under the FDCPA.
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