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Defenses to Collection of Rental Debt

With the expiration of eviction moratoria and the rapid depletion of emergency rental assistance, millions of tenants are facing an avalanche of rental debt. This includes money allegedly owed relating to a current or prior tenancy, and includes amounts for rent arrears, claims for unpaid rent after breaking a lease, and claims for alleged damage to the rental unit. This debt, when reduced to a judgment, can result in wage and bank account garnishments. Even when not reduced to a judgment, this debt can significantly lower someone’s credit score, which hurts tenants’ ability to secure safe and affordable new housing. Landlords also often refuse to rent to applicants with alleged unpaid debt to prior landlords.

This article links extensively to more detailed discussion in NCLC’s Collection Actions, Fair Credit Reporting, and Fair Debt Collection. For non-profit legal aid offices, subscriptions to these and other NCLC treatises are 50% off the standard price. The article also cites state protections for “consumers” and care should be taken to determine if a specific state statute also applies to rental debt in addition to other types of consumer debts.

Did we miss a rental debt issue you encounter in your practice? Please send information to NCLC ([email protected]) about rental debt practices, procedures, and law in your state, with citations where appropriate. Credit will be given to submitters when the information is added to this article.

Using Government Benefits to Repay Rental Debt

The federal Emergency Rental Assistance Program (ERAP) can be used to address rent arrears. See U.S. Treasury, Emergency Rental Assistance Program FAQ’s #40. In some areas ERAP funds have been incredibly slow to reach tenants and there may be funds yet to be distributed. Other places are no longer taking applicants because they will soon exhaust their funds.

Collectors’ “Do Nothing” Rent Collection Strategy—Using Tenant Screening Reports as a Club

About ninety percent of landlords use a tenant screening report to evaluate tenant applicants. Tenant screening reports are derived from multiple sources (including court records) and may contain:

  • Credit reports from the big three national credit bureaus;
  • The tenant’s income and employment history;
  • The tenant’s rental history (including evictions) and previous address history; and
  • Criminal, sex offender registry, or national terrorist watchlist history.

Only about five percent of landlords (typically the very largest ones) report on tenant debt to consumer reporting agencies (CRAs). But other landlords hire a collection agency to collect rental debt or sell debt to a debt buyer, and these third parties often, as a regular practice, report rental debt to CRAs, and this data makes its way into the tenant screening reports.

Until recently, collection agencies and debt buyers often did not bother to contact tenants about rental debt, and instead reported the debt to a CRA and waited until a tenant’s application for housing was denied. With the denial, the tenant receives an adverse action notice that includes the name and phone number of the tenant screening company that the landlord used while evaluating the application. Viewing the tenant screening report, the tenant would see the name of the collection agency or debt buyer listed as furnishing the rental debt information. The tenant might then pay off the debt in order clean up the report. This practice is called “parking” a debt on a credit report.

New FDCPA Regulation F Outlaws Parking

Parking a debt with a CRA is now illegal under the Consumer Financial Protection Bureau’s new Fair Debt Collection Practices Act (FDCPA) Regulation F, effective November 30, 2021. Reg. F, 12 C.F.R.§ 1006.30(a)(1) requires debt collectors to take certain required actions to disclose the existence of the debt to consumers before reporting it to a CRA. Since this typically will be a first contact with the consumer, Regulation F sets out extensive disclosures that must be provided about the rental debt, called “validation” information. For more detail about the Regulation F anti-parking provision, see NCLC’s Fair Debt Collection § 8.12.

Reg. F § 1006.34 requires disclosure of “validation” information at the first collection contact, or within five days of the initial communication, including an itemization of certain debt components, the name of the debt collector and the creditor to whom the debt is currently owed, instructions to dispute the debt, and disclosure of other consumer rights. This required validation information is examined at NCLC’s Fair Debt Collection Ch. 9.

Regulation F, including the anti-parking and validation information provisions, generally does not apply to landlords, unless a landlord uses a fictitious name to collect the debt. See NCLC’s Fair Debt Collection §§ 4.7.2, 4.7.4. But the provisions apply to collection agencies, landlord attorneys who regularly collect debt, and to debt buyers whose principal purpose is the collection of consumer debt. NCLC’s Fair Debt Collection §

The FDCPA makes violation of these or other Regulation F provisions actionable and provides for statutory and actual damages and attorney fees in individual or class actions. See NCLC’s Fair Debt Collection Ch. 11. Article III standing doctrines may preclude litigation of some Regulation F claims in federal court if the consumer did not suffer any concrete injury, but state court standing doctrines may be more liberal. See NCLC’s Fair Debt Collection § 11.15.

Blocking the Use of Eviction and Rental Debt Records

A growing number of states require courts to seal eviction records, preventing their inclusion in consumer reports. Although the nature of the seal varies, provisions are found in Cal. Civ. Pro. Code §§ 1161.2(A), 1161.2.5(A)(1) (West); Cal. Civil Code §§ 1785.13(A)(3), 1786.18(A)(4) (West); Colo. Rev. Stat. § 13-40-110.5(1)-(2); D.C. Code § 42–3505.09 (temporary during COVID emergency); 735 Ill. Comp. Stat. 5/9-121; Maine Rules of Electronic Court Systems Rule 4 (C); Minn. Stat. § 504B.241, subdiv. 4; Nev. Rev. Stat. § 40.2545 (limits sealing to cases where COVID-19 hardship was a factor); N.Y. Real Prop. Acts § 757 (McKinney); N.Y. Comp. Codes R. & Regs. tit. 22, § 216.1; N.J. P.L. 2021, c.189 (limits sealing to cases where COVID-19 hardship was a factor); Or. Rev. Stat. § 105.163; and Wash. Rev. Code § 59.18.367 (limits tenant screening agency from sharing eviction information with landlords).

State or local laws passed during the pandemic may prevent landlords from considering in housing applications past rental debt that occurred during the pandemic. See, e.g., Cal. S.B. 91 (enacted Jan. 29, 2021) (COVID-19 rental debt cannot be a negative factor in evaluating housing application; COVID-19 rental debt cannot be sold, thus limiting the likelihood of its being reported to a CRA); Philadelphia Bill No. 210330-A (July 15, 2021) (prohibits evaluating housing applicants based on credit information or credit report, or tenant screening report, indicating a failure to pay rent or utility bills during COVID19 emergency).

More information on state and local efforts to block the use of eviction and rental debt records in evaluating an individual for housing are found in two recent reports: Pew Charitable Trusts, State Policymakers Are Working to Change How Courts Handle Eviction Cases (Aug. 26, 2021) and Center for American Progress, Eviction Record Expungement Can Remove Barriers to Stable Housing (Sept. 30, 2021).

Review the Tenant Screening Report

Tenant screening companies are consumer reporting agencies (CRAs) and Fair Credit Reporting Act (FCRA) provisions applicable to CRAs are applicable to tenant screening companies. When a rental application is denied with the use of a tenant screening report, the tenant should receive notice of an adverse action indicating the name and phone number of the tenant screening company, even though the notice need not indicate the reason for the denial of the housing application.

Tenants should, at no charge, have access to the tenant screening report that led to the denial of their rental application, if requested within twenty days. See NCLC’s Fair Credit Reporting §§ 3.3.6, A review of the report may indicate that there is other negative information on the report that poses a more serious problem for the tenant’s chances of obtaining housing, and that there is thus no point in repaying the rental debt just to improve one’s chances of obtaining housing.

Other times, information in the report is attributed to the wrong person, mistakenly includes a sealed or expunged criminal or eviction record, is obsolete, or fails to indicate that a criminal action was dismissed. Cleaning up inaccuracies in the report may do more to help a tenant obtain housing than paying the outstanding rental debt.

Tenant FCRA rights to dispute incorrect information and have it removed from a report is set out in NCLC’s Fair Credit Reporting Ch. 4. In a nutshell, when a CRA receives a dispute of information in a report, the CRA must ask the furnisher, such as a debt collector, to re-investigate the dispute. Collection agencies or debt buyers furnishing information about rental debt will not have first-hand knowledge about the underlying debt, nor for their reinvestigation can they simply rely on the landlord-provided balance due. See NCLC’s Fair Credit Reporting § 6.10. The CRA must delete the disputed information if the furnisher does not respond with the results of its reinvestigation, generally within thirty days. See NCLC’s Fair Credit Reporting § 6.5; Fair Debt Collection § If a collection agency reports information that it knows or should know to be false to a CRA, then it is liable under both the FCRA and FDCPA for any inaccurate information. See NCLC’s Fair Credit Reporting § 6.5; Fair Debt Collection §

To trigger FCRA duties, the tenant must dispute the debt with the CRA. However, a debt collector or collection attorney receiving the tenant’s debt dispute is required under the FDCPA, 15 U.S.C. § 1692e(8), to report the dispute when it communicates with the CRA about the alleged debt. In addition, 15 U.S.C. § 1692e(8) also prohibits a debt collector from reporting information that it knows or should know is false to a CRA. Both provisions are examined at NCLC’s Fair Debt Collection § 7.2.8.

Challenging The Rental Debt Amount

Defenses to Back Rent Claims. A landlord may mistakenly seek back-rent that has already been fully or partially paid––such as where a property manager pockets the tenant’s payment or a government voucher or assistance money is not being properly accounted for. Another defense occurs if the tenant’s non-payment can be treated, according to state law, as withholding rent for property defects.

Defenses to Fees and Charges. Determine if fees and charges are authorized by the lease or state law, and if they have been incurred and are reasonable. Consider challenging a late fee charged every month where the consumer was only late on one payment, but all subsequent rent payments were considered late because the one late fee remains unpaid.

Defenses to Charges for Remaining Months on the Lease. By statute or by common law, the landlord should have a duty to mitigate damages if the tenant leaves the unit early. The landlord should make reasonable efforts to re-rent the unit. Requiring all remaining months’ rent as statutory damages should be an unreasonable penalty clause. Seeking damages before a lease’s scheduled termination date must account for the possibility that the residence will be re-rented. In addition, a military family can terminate a residential lease early without penalty upon entering military service or receiving qualifying military orders. See 50 U.S.C. § 3955(a)(1), (b)(1).

Defenses to Charges for Property Damage. The landlord should justify its claim of damages to the property, by showing the change in condition of the unit that is not caused by normal wear and tear. The cost to repair the unit should be established with business records, and, if the court follows normal rules of evidence, the records must be introduced by a competent witness. Tenants can rebut with photos, videos, or witnesses as to the unit’s condition when the tenant vacates. Even better would be to also include similar evidence as to condition when the tenant moved into the residence. Challenge the reasonableness of labor and materials costs––a $60/hr. cleaning service may be the landlord’s child cleaning after school. Does the landlord assess without justification a standard “damage” charge for all its units, irrespective of actual damage?

Many states require that the landlord first send the tenant a damage deposit statement before any portion of a damage deposit can be withheld. A state statute may provide enhanced private remedies if a landlord fails to comply with this requirement.

Special Tenant Defenses When Rental Debt Is Sought in an Eviction Proceeding

In some states, the same action can be used to evict and to collect on rental debt. The eviction proceeding will be a summary statutory proceeding to quickly establish possession, and the damage award may be determined at some future date. Defaulting on the eviction claim may lead to a default on the damage claim as well, so tenants should make an appearance in court, even if there is no defense to the eviction, because there will often be defenses to the debt amount.

Do not assume the court is authorized to award the landlord all the types of damages sought in the eviction case. In some states, a court has authority to award only back-due rent but not damages as part of an eviction proceeding. In addition, to collect damages as part of the eviction action, the landlord’s initial service of process must comport with a state’s personal jurisdiction requirements for both the eviction (in rem) aspect of the case and the later monetary relief (in personam) aspect. Is posting notice on the unit’s door sufficient service for a monetary award? If a court does not have personal or subject matter jurisdiction to hear a claim, the judgment is void and vacated, even years after a default. See NCLC’s Collection Actions §§,

If a landlord’s eviction action includes a claim for money damages and the parties agree to dismiss the case with prejudice (such as where the tenant agrees to move out immediately), then the claim for damages is also dismissed with prejudice. It may be an FDCPA violation to later bring a claim that a court has dismissed with prejudice.

Special Defenses Where Rental Debt Sought in a Separate Action

Unique issues arise where a landlord does not seek rental debt in an eviction action, but later brings a separate action to collect on rental debt. Tenant advocates report that landlord attorney litigation practices often approximate those of law firm collection mills collecting on consumer debt—filing large numbers of cases without paying attention to legal niceties, proper procedure, or the facts of an individual case.

This business model is based on the collection law firm’s reliance that most cases will result in a default judgment. A collection attorney may not expect it to be necessary to have developed adequate evidence to prove liability and the amount of damages. A tenant who makes an appearance in the case and challenges the plaintiff’s complaint and evidence may have surprising success, particularly when represented by an attorney. The landlord’s law firm may want nothing more than to just drop the case, because its business model is based on quick, inexpensive default judgments.

Another issue with a collection suit filed after an eviction is that the tenant can no longer be served at the former place of residence. To track down the tenant’s new address, a collector may turn to a credit report for any individual with the same name, but this can lead to a mismatch where someone with similar identifying information as the tenant is served with legal process instead. See NCLC’s Collection Actions § 5.3.1. Service of process at the old location or other wrong location goes to the court’s jurisdiction, and this is a basis to void a judgment, that can be brought even years after the court issues a default judgment. See NCLC’s Collection Actions §

Other Standard Debt Collection Defenses that May Apply in a Collection Lawsuit for Rental Debt

Consider these other standard defenses for a consumer collection case that may apply in a rental debt collection case:

  • Liability of Party Sued—Is the defendant the correct household member who is liable on the lease? If one spouse signs a lease, is the other spouse liable? Even if a state has an enforceable doctrine of necessaries makings spouses liable for debts of the other spouse, this applies only to necessaries, and not to claims for damage to the residence, late charges, prejudgment interest, attorney fees, or rent for the remaining months of a lease after early termination. See NCLC’s Collection Actions § 5.3.4.
  • Debt Buyer’s Chain of Title—Has a debt buyer plaintiff proven ownership of the debt through an unbroken chain of assignment documents (not just an affidavit)?  See NCLC’s Collection Actions § 4.3.4.
  • Can a Collection Agency Sue—Does state law allow a collection agency to sue in its own name, while the landlord retains ownership of the debt, and has the collection agency complied with any state requirement for documentation of that authority? See NCLC’s Collection Actions § 4.3.3.
  • Introduction of Lease into Evidence—Has the lease been properly introduced into evidence? A blank copy of the landlord’s standard form lease is insufficient; it must be signed by the tenant.  See NCLC’s Collection Actions § 4.5. Surprisingly, a debt buyer or other plaintiff may not be able to readily produce a signed lease.
  • Special Pleading Rules for Debt Buyers—A debt buyer plaintiff may have to comply with special state pleading requirements found in California, Colorado, Connecticut, Delaware, Illinois, Indiana, Maine, Maryland, Massachusetts, New Mexico, North Carolina, Oregon, Texas, and Washington. See NCLC’s Collection Actions §§ Be sure that the relevant state law in your area also applies to rental debt.
  • Compliance with Default Judgment Requirements—Has a default judgment complied with special state requirements applicable to consumer debt or for debt buyer actions found in California, Colorado, Connecticut, Delaware, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Minnesota, New Mexico, North Carolina, Oregon, and Washington?  See NCLC’s Collection Actions § 12.3.13. Do these requirements apply to rental debt? Failure to comply with such statutes may prevent entry of the default judgment or potentially can be used to re-open a judgment.
  • Licensure—Does a debt buyer or collection agency plaintiff have to be licensed and, if unlicensed, can it bring an action in the state’s courts? See NCLC’s Collection Actions § 3.3.
  • Statute of Limitations—For old rental debt, particularly where the plaintiff fails to prove a written lease, the state’s statute of limitations may be a defense. In some states, the limitation period for claims based on a non-written contract is far shorter than for a written lease. See NCLC’s Collection Actions § 3.7.4.
  • Counterclaims—Are there tenant counterclaims, such as where there are habitability or code violations, broken landlord promises, or threats to evict despite an eviction moratorium? Beware that adding counterclaims may raise the stakes for the landlord and result in the landlord paying more attention to the case. 

Tenant’s Affirmative Action for Litigation Misconduct

The attorney for a landlord or debt buyer may be liable for its litigation misconduct under the FDCPA, a UDAP statute, or abuse of process. See NCLC’s Fair Debt Collection §§ 7.4.10, 15.6, 16.3, 16.5 and Collection Actions § 17.5.

These claims should be brought affirmatively in a second lawsuit, and not as counterclaims to a landlord’s collection action because the landlord typically is not subject to the FDCPA. When claims are brought as a counterclaim against a collection agency or debt buyer plaintiff, the collector may try to clean up its conduct in that lawsuit, dig up evidence it was otherwise unwilling to find, or otherwise more aggressively pursue the case. Moreover, the full extent of the landlord attorney’s litigation misconduct will not be evident until the case is concluded. These are all reasons to bring an affirmative action for litigation misconduct only after conclusion of a suit to collect rental debt. See NCLC’s Collection Actions § 17.5.2.

Nevertheless, in a subsequent lawsuit for litigation misconduct, be mindful of the statute of limitations, particularly for an FDCPA claim which has a one-year statute of limitations. Litigation misconduct also should involve more than the landlord failing to prevail, but should involve false, deceptive, or abusive practices.

Eight Ways for Prevailing Tenants to Recover Fees in the Landlord’s Collection Action

As in an action to collect consumer debt, a prevailing tenant may be able to recover attorney fees from the landlord or other party collecting the rental debt:

  1. Statutes Allowing Reciprocal Fees—Ten states—California, Connecticut, Florida, Hawaii, Montana, New Hampshire, New York, Oregon, Utah, and Washington—have reciprocal fee statutes. See NCLC’s Collection Actions § 17.1.3. If a contract provides fees for a prevailing creditor, a prevailing debtor has the right to fees. Parse a reciprocal fee statute to ensure it applies to rental debt. 
  2. Statutes Allowing Fee Recovery for Prevailing Parties—Statutes in some states provide in certain collection lawsuits that either party that prevails can recover fees, such as in any civil case, in an action arising out of a contract, in an action to recover on an open account, in an action seeking under $10,000, in an action to controvert a garnishment (such as when the judgment is set aside or found to be void), or when an action is voluntarily dismissed. For a listing of these statutes, see NCLC’s Collection Actions § 17.1.4. Some of these statutes may apply to rental debt. A state’s landlord-tenant code also may provide for fees for a prevailing party or a prevailing tenant. See, e.g., Minn. Stat. § 504B.172. 
  3. Lease Terms—While leases typically provide attorney fees only for a prevailing landlord, read the lease carefully to see if it can be interpreted so that either party that prevails can recover its fees. Any ambiguity as to whether a prevailing tenant is contractually entitled to fees is interpreted in the tenant’s favor because the landlord drafted the agreement.
  4. Statutory Fees Provided for in Tenant’s Counterclaims—Counterclaims against a landlord may provide for statutory fee awards, such as under a UDAP statute, a state debt collection statute (if applicable to original creditors like the landlord), or a state landlord-tenant statute. If a debt buyer is the plaintiff, an FDCPA counterclaim is also possible. A tenant may be able to recover for attorney time spent not only on the counterclaim, but also on aspects of the case that are intertwined with that counterclaim. See NCLC’s Collection Actions § 17.1.5
  5. Recovery of Fees in a Class Counterclaim—A class counterclaim to a landlord’s collection lawsuit may allow for fees either under a fee-shifting statute or a common fund theory. The Class Action Fairness Act (CAFA) cannot force a state court class counterclaim into federal court.  See NCLC’s Collection Actions § 5.7.3.
  6. Recovery of Fees as Actual Damages—A tenant’s subsequent FDCPA, UDAP, or abuse of process lawsuit for the landlord attorney’s litigation misconduct in the rental debt collection lawsuit can seek the tenant’s attorney fees from the first lawsuit as actual damages in the tenant’s subsequent lawsuit. See NCLC’s Collection Actions § 17.4. The prevailing consumer in this second action may be able to recover FDCPA or UDAP fees for attorney time spent on the second action while also recovering as actual damages fees expended in the first case. See NCLC’s Collection Actions § 17.1.6.
  7. Where Collector Refuses to Admit to Facts—If the court in the collection lawsuit allows for such discovery, send the landlord’s attorney requests for admissions. The requests are deemed admitted if the landlord fails to timely respond. If the landlord denies the requested admissions without a reasonable basis, the landlord can be liable for the reasonable costs of the tenant’s proof of the denied facts, including the tenant’s attorney fees. See NCLC’s Collection Actions § 17.1.7.
  8. Fees for Groundless Litigation—Fed. R. Civ. Proc. 11 and parallel state rules provide for sanctions, including attorney fees, if the plaintiff’s factual contentions do not have evidentiary support, unless if specifically identified that there will likely be evidentiary support after further investigation or discovery. A debt buyer may violate this standard if it brings a rental debt collection action without evidentiary support and does not specifically identify that it will have support after a further investigation.  See NCLC’s Collection Actions § Other state statutes provide for sanctions when a claim is groundless, when there is no justiciable issue of law or fact, or when a case is brought without substantive justification. For a summary of such state statutes, see NCLC’s Collection Actions §

The Collector’s Post-Judgment Remedies

A landlord cannot seize a tenant’s wages, bank accounts, or property to repay rental debt unless the landlord first obtains a court judgment on the debt. Threats by collection agencies, the landlord’s collection attorney, or a debt buyer to take such actions without having obtained a judgment should violate the FDCPA, a state UDAP statute, or other state law. Once a judgment is obtained, the plaintiff can, if permitted by state law, seek to garnish a portion of the tenant’s wages, seize non-exempt funds in the tenant’s bank account, and even seize non-exempt personal property.

Federal and state exemptions offer important protections. Federal law automatically limits the amount that can be taken in a wage garnishment, and state law may provide even greater protection. State law in a few states also automatically protects additional amounts in a bank account, but in most states a tenant must affirmatively raise applicable exemptions after an account has been frozen. For a state-by-state analysis of applicable wage and bank account exemptions, see NCLC’s Collection Actions Appx. H (for a limited time open to the public, not requiring a subscription). A federal rule automatically protects from both seizure and being frozen, two months of Social Security, SSI, or certain other federal benefits that are directly deposited into a bank account. See 31 C.F.R. §§ 212.1 to 212.12; NCLC’s Collection Actions § 14.5.4.

Wage and bank account garnishment can be avoided by successfully setting aside a default judgment. Jurisdictional grounds can be raised at any time and should void a judgment, preventing any post-judgment remedies. A motion to set aside a judgment that is based upon the tenant’s excusable neglect to participate in the litigation should be raised within applicable time limits (such as one year) and the tenant should at least indicate a colorable defense to the debt. For a general discussion of setting aside a default judgment, see NCLC’s Collection Actions § 12.3.

A bankruptcy filing instantly stops all collection actions, including garnishment and seizures. Tenants probably should not file bankruptcy just because they owe rental debt, but preventing wage garnishment and ongoing seizure of monies in a bank account may be an adequate reason to file for bankruptcy. See NCLC’s Collection Actions § 12.5. The bankruptcy cannot be grounds to discriminate against a tenant in an application for public housing. See NCLC’s Consumer Bankruptcy Law and Practice § 15.5.4.


We want to thank for their contributions to this article: Farah Majid of Legal Services of Alabama, Scott Kinkley of the Northwest Justice Project, and Matthew Vocci of Santoni, Vocci & Ortega, LLC. We also want to thank the following NCLC attorneys for their contributions: Jon Sheldon, April Kuehnhoff, Ariel Nelson, Carolyn Carter, and Steve Sharpe. A number of readers have provided us with additional material added to the article after its initial publication, including Minnesota attorneys Peter F. Barry and Paul Birnberg.