Regulators propose cap on HOA collection fees

By Buck Wargo

Thursday, March 25, 2010 | 2:05 a.m.

A commission with the authority to regulate collection fees that homeowners associations charge is mulling a cap to prevent collection companies from gouging homebuyers.

Following a lengthy hearing Wednesday at the Sawyer State Office Building, the seven-member Commission For Common-Interest Communities and Condominium Hotels directed it staff to draft a proposal limiting collection-related fees to $1,950 per homeowner association.

The proposal, however, isn’t expected to soothe the ongoing battle between investors who are buying foreclosed-upon homes and collection agencies that represent homeowners association trying to collect past due assessments.

Chris Yergensen, corporate counsel for RMI, a property management company, and its affiliate Red Rock Financial Services, a collection company, proposed the cap Wednesday in a hearing that brought dozens of people to talk on both sides of the issue.

“We have heard the horror stories of $8,000, $4,000 and $3,000 in fees,” Yergensen said in pushing his proposal. “You put that cap on, and that’s not going to happen again.”

Investors, meanwhile, said they would unveil their own proposal on what fees collection agencies can charge to counter what the collection companies have recommended.

More public workshops will be scheduled and the proposal will return to the commission for further review over the next two months.

Three commissioners, led by Randolph Watkins, expressed support for setting a higher cap at $2,500 so they wouldn’t have to go through the process so soon, but their colleagues said any resetting of fees in the future would be a much simpler task.

Late last year, collection companies worked with the commission on proposing fees to cover the services they charge, but investors balked at proposed charges of $325 for a notice of delinquent assessment lien, $400 for a notice of default and several other fees that exceed $100.

Earlier this year, investment groups filed a class action lawsuit claiming they were overcharged by hundreds of homeowners associations and collection agencies for fines, interest and collection costs that accumulated while homes sat vacant during foreclosure proceedings.

Michael Lathigee, one of the investors who objects to the amount of fees the collection agencies charge, said the latest proposal seems too high and he wants to see it reduced.

Some investors have called on the commission to let their group sit down with collection company officials to develop a proposal or allow a neutral third party to get involved to help set fees.

“I don’t want the proposal coming from the collection industry,” Lathigee said.

Lathigee also expressed concerns about commission members knowing collection company executives and having dealings with them when some, for example, served on homeowner association boards.

Commission members said they have no conflict and can be impartial. Besides, it’s impossible that they haven’t been in contact with people in the industry, some said.

“We are going to do what is just and merciful,” commission member Favil West of Henderson said during the workshop. “I am 73 years old. I know people.”

David Stone, president of collection company Nevada Association Services, said he’s happy with the proposed cap.

“We don’t have a problem with it. I don’t know anywhere we have had fees over $1,950,” Stone said. “What it does is collection agencies that are charging exorbitant fees, which is why we are in this position, will hopefully get in line.”

The proposal would not cap the total amount of collection fees a homeowner may pay if the home falls under several association jurisdictions. A homeowner could pay the $1,950 cap several times.

Some homeowner association officials were leery of a cap that limits profits of collection companies. They were concerned it would result in those firms passing down fees to associations and therefore cutting into their budgets.