Vail Daily column: Condo associations can now report payments to credit bureaus
The Mortgage Guy
Credit reporting is expanding every month it seems. Recently I noted a new service that would allow renters to get their perfect rent payment history counted as part of their credit scores. The latest potential addition to a borrower’s credit file might be their history of paying their condo fees on time.
Equifax, one of the three major bureaus, announced recently that it is working with a company called Sperlonga to collect data from home owners associations nationwide to include homeowners association fee payments in consumers credit reports. Sperlonga collects the data from homeowners associations and then reports it to the data.
The impacts of this, like most things, could be good or bad for consumers and for homeowners associations, and I see a lot of red flags here for all parties to approach this cautiously. Homeowners association boards and managers should not sign on for this without some thorough consideration.
On the one hand, it could reduce delinquency issues for homeowners associations, which often operate on thin reserve margins and a spate of delinquent payers might well hamper the homeowners associations ability to function. If delinquencies dropped so would the cost and effort of collecting back dues.
The good news for homeowners is that if they pay every month, they would get additional juju on their credit scores. Nobody has quite figured out what the impact would be yet, but it should be positive.
On the other hand, homeowners associations need to realize the risk involved when you start reporting someone’s credit history. The Fair Credit Reporting Act provides considerable penalties and civil liabilities for creditors who systematically report inaccurate or incorrect information. In addition, it’s questionable if a homeowner has to give the homeowners association their Social Security number to facilitate this reporting if they don’t want the information on their credit reports. Unless it is written into the condo documents that the homeowner must give such information out to the homeowners association, then it’s doubtful they could demand it.
And, the homeowners association or management company would have to review its collection policies and bookkeeping to be sure that everyone was treated equally. While current laws do dictate every board must have a policy for dealing with late payers that treats everyone equally, the reality is that if, for example, it was known that one owner was dealing with a major medical or family issue and was behind on his dues, the board might cut that individual some slack and not extend the same courtesy to an owner who was late paying but was known to drive around in an expensive sports car. While such disparate treatment is technically a violation of the law, it does go on.
If the homeowners association was reporting the one owner late and not reporting the other owner equally late, then the homeowners association may be violating the Fair Credit Reporting Act and open itself up to civil liability from the guy in the sports car, when in fact they were just showing some reasonable neighborly consideration to the owner who might have had a valid reason for being late.
Also, there are sometimes informal agreements reached between managers and homeowners on repayment of delinquent dues. The question would then come up if the late payments should be reported, or is the owner “paying as agreed”?
The setup for an homeowners association with Sperlonga reportedly entails the company to have online access to the homeowners associations bookkeeping system to extract data on homeowners association payments. Many homeowners associations use part time bookkeepers, and it might be a few days from the receipt of a payment to the posting of it. Informally, the parties involved may agree that the payment got there on time, but if its posted late, the homeowner may suddenly find he is being reported as late.
While I do believe that an individual’s credit history should be as complete as possible, my suggestion to any homeowners associations might be one to pass on this opportunity. Building credit history is generally less an issue for property owners than for renters.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtn mortgageguy.com.