Posted: September 10, 2014

Liens For Municipal Water And Sewer Charges Not Debts For the Purposes of the FDCPA

On August 27, 2014, the Second Circuit entered a decision in Boyd v. J.E. Robert Co., 12‐4422-CV, affirming a decision by the EDNY holding that water and sewer service liens were not debts for the purposes of the Fair Debt Collection Practices Act.

In Boyd, the EDNY dismissed the plaintiffs’ putative class action alleging “that defendants obtained unauthorized attorneys’ fees and costs in connection with actions to foreclose liens on plaintiffs’ properties arising out of unpaid municipal property taxes and water and sewer charges” in violation of the FDCPA, holding that the liens involved “did not involve a ‘debt’ as defined by the FDCPA.” The Second Circuit affirmed, explaining:

In order to maintain an FDCPA action, the allegedly unlawful behavior must occur in connection with collection of a “debt.” The FDCPA defines “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5) (emphasis supplied).

We have not addressed the question of whether New York City’s mandatory water and sewer charges involve “debt” within the meaning of the FDCPA. In Beggs v. Rossi, we held that municipal taxes levied automatically in connection with ownership of personal property do not involve a “transaction” as that term is understood under the FDCPA and, accordingly, are not “debt” for purposes of the FDCPA. 145 F.3d 511, 512 (2d Cir. 1998). We now conclude that the New York City water and sewer charges also do not involve “debt” under the FDCPA. Rather, the relationship between plaintiffs and the City with respect to such charges is akin to “taxpayer and taxing authority,” and “does not encompass that type of pro tanto exchange which the statutory definition envisages.” Beggs, 145 F.3d at 512.

Like property taxes, New York City water and sewer charges are levied, in some amount, as an incident to property ownership in New York. In addition, the actions to foreclose the liens in question were instituted pursuant to New York law governing “tax liens.” Further, the city ordinance governing foreclosure of water and sewer liens requires that they be conducted “in the same manner as a lien for [] taxes.” N.Y. Pub. Auth. L. § 1045‐j(5). In light of the foregoing, the charges at issue are best treated as akin to the municipal property taxes discussed in Beggs and, accordingly, outside the scope of the FDCPA.

Posted in EDNY, Appeals, FDCPA
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