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7th Circuit Rules that Management Companies are not debt collectors

Debt Collector

In a recent decision, the US Court of Appeals for the 7th Circuit ruled that management companies that collect rent for an owner are not debt collectors under the Fair Debt Collection Act. For this opinion read: Carter v AMC LLC

Normally an owner hires a mangement company to manage its property and collect the rent each month. The Fair Debt Collection act was enacted to protect consumers from debt collectors. Debt collectors are required to follow strict procedures. Failing to do so results in sometimes substantial damages awarded to the consumer.

Here in this case the 7th Circuit ruled as a matter of law management companies most times are not debt collectors and thus the Federal Fair Debt Collection Act does not apply. In rare instances where the management company takes over a property and a tenant is in arrears on the rent and then the management company starts attempts to collect, then possibly the management company may be liable under the Act.

This decision undermined a recent decision by the Illinois Appellate Court whereby one Justice found that the Debt Collection Act did apply.