Article Courtesy of The Tampa
By Susan Taylor Martin.\
January 5, 2016
Tampa-based LM Funding America is off to a rocky
start as a publicly traded company.
The firm — which buys the rights to collect delinquent homeowners
association dues — is under attack in two lawsuits accusing it of
One suit, filed by a Miami condo association, alleges that LM Funding
concocted a "criminally usurious lending scheme'' that targeted
struggling community associations.
The other suit, by a company that buys distressed assets, accuses LM
Funding and its CEO, Tampa attorney Bruce Rodgers, of demanding payment
of fees to which they are not entitled.
Both lawsuits seek status as class actions, a move that could vastly
expand the number of plaintiffs trying to collect from LM Funding.
Rodgers on Friday called the claims "baseless and without merit."
"All of the things they are alleging we do are on behalf of community
associations comprised of ordinary citizens that have to pay more if
these lawsuits succeed,'' he said. "We really are defending the little
Founded in 2008, LM Funding says it helps struggling associations by
paying them upfront money for maintenance and repairs in exchange for
the right to collect delinquent fees from unit owners. The amount LM
Funding pays is equal to what the association would receive by law if
the lender foreclosed — 12 months of delinquent assessments or 1 percent
of the mortgage value, whichever is less.
LM Funding then hires Business Law Group — a Tampa law firm founded by
Rodgers — to bill the owners. After collecting the debt, the law firm
keeps enough to cover attorney fees and costs and gives LM Funding the
interest, late fees and an amount equal to what it paid the association.
Whatever is left goes to the association.
Since its founding, LM Funding has bought the collection rights on
11,000 condos in nearly 500 associations. Among them are numerous condos
that Primestar-H Fund 1 Trust acquired after the owners defaulted on
In a suit in federal court in Tampa, Primestar acknowledges it is liable
for a certain amount of past-due association fees. But Primestar says
Rodgers, LM Funding and Business Law Group also demanded attorney costs,
late fees and other charges not allowed under Florida law.
In one case, that of an Orlando condo, Primestar says its maximum
liability on the $226,5000 mortgage balance was 1 percent, or $2,265.
But Business Law Group demanded it pay $36,623.
"Defendants' practice essentially holds first mortgagees . . . hostage
because they cannot obtain clear title and dispose of a property until
they satisfy the association's lien,'' the suit says.
Aaron Gordon, LM Funding's general counsel, said the so-called "safe
harbor" cap that limits liability for delinquent fees does not apply in
all cases. He also questioned Primestar's decision to file suit after LM
Funding had raised almost $10 million by going public in October.
"You can surmise the motivation," he said.
In a suit filed in Miami-Dade County, the Solaris at Brickell Bay
Condominium Association says that while LM Funding purports to "buy" the
rights to delinquent accounts, it actually operates as a lender charging
illegally high interest.
In 2011, LM Funding paid Solaris $140,458 but later collected $198,410
on the accounts. When Solaris terminated the contract, LM Funding
demanded an additional $395,605 for what it said was the value of
uncollected accounts and the interest that had accrued on them.
"Thus a debt of less than $150,000 became a debt of nearly $600,000 in
less than three years," the suit says.
Alleging that LM Funding violated Florida's usury laws, Solaris wants
the company to pay it and other condo associations double the amount of
interest it has collected — potentially hundreds of thousands of dollars
Gordon, LM Funding's Counsel, said the suit is meritless.
"They are on their third amended complaint," he said. "It keeps getting
dismissed because they have trouble stating a complaint."