How do we hire a collection agency for unpaid HOA dues?

By OurHOA · General information · Revised October 17, 2026

How an HOA board hires and supervises a collection agency for unpaid dues: agency vs attorney, FDCPA rules, contract terms, and the TX, FL and CO steps first.

Part of the HOA board handbook: treasurer and money.

The short answer

Adopt a written collection policy first, then hire one agency or collection law firm under a signed contract the board has read line by line. Before signing, confirm three things: the agency holds whatever license, registration or bond your state requires; its fee structure lets the association pass costs to the owner under your state's law; and the contract keeps the board in charge of settlements, lawsuits and credit reporting. Refer an account only after every notice your state requires has gone out and the cure period has run, and only by a recorded board vote where the law or your policy calls for one. After that, read the agency's report every month. The agency works for the association, and the board answers for what it does in the association's name. Rules vary by state and by your governing documents, so treat this as education, not legal advice, and have the association's attorney review the contract and your notice templates.

Agency or attorney

A collection agency sends letters, makes calls, sets up payment arrangements and, where the law and the contract allow, reports to credit bureaus. It cannot file a lien foreclosure or represent the association in court. A collection law firm can do everything the agency does and also record liens, file suit and handle a foreclosure or bankruptcy claim. Many boards use an agency for small balances and an attorney once a lien or lawsuit is on the table. Others send everything to one law firm so the file never has to move. Both are usually covered by the federal Fair Debt Collection Practices Act. The Act defines a debt collector as someone who regularly collects debts owed to another, and a debt as an obligation for personal, family or household purposes, which describes a homeowner's assessments. In Heintz v. Jenkins (1995), the Supreme Court held that lawyers who regularly collect consumer debts through litigation are debt collectors too. That means the collector must send a validation notice within five days of first contact and stop collecting a disputed amount until it sends verification, under 15 U.S.C. 1692g and the CFPB's Regulation F at 12 CFR 1006.34. A board that hires a collector with a sloppy compliance record can end up defending the collector's mistakes.

Check your state's rules before you sign

Texas. For subdivisions under Property Code chapter 209, section 209.0064 says an owner is not liable for a collection agent's fees unless the association first sends a certified-mail notice listing each delinquent amount, describing any payment plan option, and giving at least 45 days to cure. The same section has two rules that shape the contract. An owner owes none of the agent's fees if the association's obligation to pay the agent depends on what is recovered, or if the agreement does not require the association to pay all of the agent's fees. A pure contingency deal, where the agent is paid only out of what it collects, therefore cannot be billed to the owner. The agreement also cannot stop an owner from contacting the board or manager about the debt, and the association cannot sell its receivables except as loan collateral. Section 209.0065 bars credit reporting of any amount under a pending dispute and requires a detailed report of charges 30 business days before reporting. Texas Finance Code section 392.101 requires third-party debt collectors to file a $10,000 surety bond with the Secretary of State. Florida. For HOAs under chapter 720, section 720.3085(3)(d) bars charging an owner attorney fees on a past-due assessment until the association delivers a written notice of late assessment giving the owner 30 days to pay, using the statute's form. Consumer collection agencies must register with the Office of Financial Regulation under section 559.553, which exempts members of The Florida Bar. Section 559.72 lists prohibited collection practices for any person collecting consumer debts, so it reaches the association and its manager as well as the agency. Colorado. Under C.R.S. 38-33.3-209.5(5), an association cannot use a collection agency at all unless it has adopted and follows a written collection policy that meets the statute. Before referral, subsection (1.7)(a) requires the association to contact the owner with a certified-mail notice of delinquency plus two other means, such as a call, text or email, and to keep a record of each contact. The referral itself needs a majority vote of the board in a recorded vote at a meeting, and a manager cannot refer an account without one. Section 38-33.3-316.3 requires a good-faith effort to offer a payment plan of at least 18 months first. Collection agencies need a license from the administrator in the Colorado Department of Law under C.R.S. 5-16-118.

How to vet an agency

Ask two or three firms for a proposal and give each the same facts: number of homes, accounts now past due, total balance and the oldest balance. Then check each one. Look up the license, registration or bond on your state's site, and confirm it is current in the agency's legal name. Ask how many community associations it collects for in your state, and call two of those boards. Ask for its standard validation letter and read it against Regulation F; a firm that cannot produce one on request is not ready for your file. Ask whether client money goes into a separate trust account, how often it remits, and what its monthly report shows. Ask who answers owner disputes and how fast. Ask whether it carries errors and omissions coverage. Last, ask what it does when an owner files bankruptcy, because every collection must stop once the automatic stay applies, and the agency needs a process for catching that.

Contract terms to get in writing

Fees. Write down exactly what the agency charges, who pays it and when. In Texas, read the fee clause against section 209.0064(c) before anything else. Elsewhere, confirm with your attorney that your declaration and state law let the association pass the cost to the owner, and in what amount. Authority. The agency may not settle for less than the full balance, waive charges, report to a credit bureau, record a lien or file suit without written approval from the board or a named officer. Spell that out. Money. Payments go into a trust account and reach the association within a set number of days, with a statement showing how each payment was applied. Texas section 209.0063 and C.R.S. 38-33.3-316.3(4) set the order in which owner payments are applied; Florida's order appears in 720.3085(3)(b). The agency must follow the order your state sets, not its own. Records and exit. The board can recall any account at any time. On termination, the agency returns every file and ledger within 30 days. Owner data stays confidential and is used only for this engagement. The agency may not assign the contract or the accounts to anyone else.

Referring an account, with wording to copy

Send the agency a complete file, not a name and a number. It should hold the owner's ledger from the first missed payment, every notice with its certified-mail receipt, the payment plan offer and any reply, the collection policy, the pages of the declaration that create the assessment and the lien, and the minutes showing the referral vote. An agency working from a bad ledger will send a validation notice with the wrong amount, and the dispute that follows costs more than the debt. Motion: 'I move that the board refer account number ___ to [agency name] for collection under our agreement dated ___, the statutory notice having been sent on ___ and the cure period having ended on ___ without payment or a payment plan.' Refer to the account by number, not by name. A sample sequence once the referral passes: day 0, the treasurer sends the file. The agency's first letter carries the validation notice, or the notice follows within five days of that first contact. About 30 days after the owner receives it, the Regulation F dispute window closes, and the agency tells the board which owners disputed and what it sent them in reply. Monthly after that, the board reviews the report and decides on any next step the contract reserves for it.

Supervising the agency after the referral

Put the collections report on every regular meeting agenda, handled in executive session where your state allows it. Check each referred account: amount collected, amount remitted, fees taken, owner contact and status. When an owner pays the association directly, tell the agency the same day so it stops collecting a paid balance. When an owner disputes a charge, pull the ledger and the notice file yourself rather than leaving the answer to the agency. Once a year, compare what the agency recovered with what it cost, and recall accounts that have sat untouched for months. Owners have strong feelings about collections, and our guide on whether an HOA can make you pay through a collection agency or attorney only explains what they will be reading.

Mistakes boards make

Signing the agency's standard contract without reading the fee clause, then learning the owner cannot be charged and the association owes the bill. Referring an account before the cure period ends, which can void the right to pass along the fees. Letting a manager send accounts out without a board vote, which Colorado now prohibits outright. Sending fines to collections on the same terms as assessments, when your state treats the two differently. Forgetting to tell the agency about a payment, a payment plan or a bankruptcy filing. Hiring the cheapest firm without checking its license, which can leave the association tied to a collector operating illegally. For the full run of notices that comes before any referral, see our timeline for collecting past-due HOA dues.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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