Debate in legislature over collection agency fees

A $75 question touched off a flurry of debate Thursday during a hearing on how much collection agencies can charge Nevada homeowners who fall behind on their payments.

The question was posed by Sen. Ruben Kihuen, D-Las Vegas, who asked how collection agencies could justify charging $75 for a form letter that tells homeowners they are in debt. Kihuen's query was part of a hearing before the Senate Judiciary Committee over SB243, which proposes to cap the fees collection agencies can charge homeowners.

The bill seeks to tamp down on what sponsor Sen. Allison Copening, D-Las Vegas, called the egregious fees third parties, like collection agencies, charge for pursuing homeowners who have fallen behind on payments to their homeowner associations.

According to exhibits submitted at the hearing, depending on the agency, fees can be $270 for a demand letter, $650 for a notice of lien and $240 for title search services.

Such fees are often passed onto homeowners instead of being paid by the homeowner associations.

David Stone, president of the collection agency Nevada Association Services, defended the fees he charges. Stone said collection isn't just a matter of sending a letter and being done.

Each letter, he said, elicits an average 1.5 phone calls from recipients. People who answer those calls have to know debt collection practices, Stone said, which adds to the overall cost that the fees help cover.

SB243 would define exactly how much collection agencies could charge and cap the total at $1,800. Although supporters said the measure was a way to curtail inflated costs, several people, including presidents of homeowners associations, had reservations about the bill.

Some said capping fees would leave them without any way to recover their costs if homeowners continue to default.

Other witnesses said although caps are a good idea, residential communities still have to find a way to compensate for the lost fees. Communities can currently recoup nine months of late fees. They said SB243 does not help them cover the costs communities still need to pay when homeowners default.

No action was taken on the bill.