As someone who hit the age of 18 prior to 2009 and the enactment of the Credit CARD Act, I can remember when I signed up for a half-dozen credit cards to supplement my student loans and to receive that ‘free’ logo t-shirt, knit cap, or whatever else that was being marketed as an incentive. I had no idea at the time of the implications of my actions and the importance of my credit score. Fortunately for me time and money healed those wounds, and now that I learned the hard way the lesson is now all too clear: your credit history and score are important.
But what should be reported to the credit bureaus? While I wish my college spending habits were not, I do admit it my score then reflected my borrowing ability for larger purchases. What about the history of our ability to pay our association’s common area fees and assessments?
Sperlonga Data & Analytics, a data aggregation business for non-standard credit data sources, has begun offering a service to report payment of assessments to Equifax Inc. According to its press release, Matt Martin, Sperlonga’s chairman and founder, said “The vast majority of property owners who live in an association have been paying their assessment payments on time for many years and now our service will begin to help reward them with positive monthly reporting to their credit profile with Equifax.”
Associations will need to sign up to for the service. Sperlonga will then use automated technology to pull assessment payment data from property management companies’ accounting software, creating a record and reporting it monthly to Equifax.
Sperlonga’s website calls it a win-win for the associations, management companies, and property owners. Sperlonga suggests its service could improve association cash flow, help lower delinquency rates and reduce or eliminate increases in assessments due to high delinquencies. It may provide the positive reporting incentive to owners who timely pay their assessments and may discourage owners from paying late by reporting delinquencies.
For those who may be obsessed with increasing their credit score or who are looking to just increase their score to secure a loan for another large purchase without having a hard inquiry and issued a new credit card, having our assessment payment history listed as an obligation on our credit reports is beneficial. However, is in the best interest of our associations?
Patrick Brady and Mark Einhorn, partners in Marcus, Errico, Emmer & Brooks, P.C., the largest New England law firm specializing in condominium law, say it may not be, and associations who sign up for the service may be taking significant, unwanted and unnecessary liability risks.
In response to the press release, Brady and Einhorn write associations would be vulnerable to lawsuits under the Fair Debt Collections Practices Act (FDCPA) if they submit erroneous information about owners, and they would have to comply with applicable provisions of the Fair Credit Reporting Act (FCRA). Further, associations may have to worry about discrimination complaints if they are not consistent in the way they report delinquent payments.
So while this service is new and its risks and rewards yet to be seen, will you be advocating for your association board to sign up for the credit reporting service? Should you be rewarded for paying your assessments on time knowing that your delinquent neighbors are being penalized?