State Debt Collection Laws

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1 State Debt Collection Laws Licensing and Substantive Regulation Lauren Campisi McGlinchey Stafford PLLC

2 The Legal Landscape for Consumer Debt Collection What laws govern the collection of consumer debts? Federal Laws Fair Debt Collection Practices Act ( FDCPA ) Other consumer protection statutes State Laws Fair Credit Reporting Act ( FCRA ) Gramm-Leach Bliley Act ( GLBA ) Telephone Consumer Protection Act ( TCPA ) Federal Trade Commission Act ( FTC Act ) State Debt Collection and Collection Agency Acts Unfair and Deceptive Trade Practices Acts

3 FDCPA: Who Does It Apply To? Defines debt collector as: any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be due another.

4 FDCPA: Who Does It Apply To? Does the FDCPA apply to creditors? Creditors generally excluded; however, Definition of debt collector includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts The term creditor does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.

5 FDCPA: Who Does It Apply To? Does the FDCPA apply to servicers? servicer exemption Debt collector does not include any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity: concerns a debt which was not in default at the time it was obtained by such person what does in default mean?

6 FDCPA: Who Does It Apply To? Does the FDCPA apply to debt buyers? active debt buyers passive debt buyers Case law focuses on the status of the debt at the time it is acquired. See Ruth v. Triumph Partnerships, 577 F.3d 790 (7th Cir. 2009). McKinney v. Cadleway Properties, Inc., 548 F.3d 496, (7th Cir. 2008); Federal Trade Commission v. Check Investors, Inc., 502 F.3d 159 (3 Cir. 2007); Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, (7th Cir. 2003)

7 FDCPA: Who Does It Apply To? Even if you are not a debt collector, Are your vendors debt collectors? Are your sub-servicers debt collectors? Are your outside counsel debt collectors?

8 FDCPA: What Does It Govern? FDCPA restricts: Who you can communicate with When you can communicate How you can communicate What must be disclosed in your communications Provides other limitations and affirmative obligations on debt collectors

9 FDCPA: Who Is The Regulator? Originally enforced and interpreted by the Federal Trade Commission No rulemaking authority. Under the Dodd-Frank Act, the Consumer Financial Protection Bureau has enforcement authority and rulemaking authority

10 Hot Topics Under the FDCPA Collection Calls What s the problem? Conflict between what you must say (disclosure requirements) and what you can t say (limitations on third party disclosure). What you must say? meaningful disclosure of the caller s identity and in the initial communication the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and in subsequent communications the communication is from a debt collector. What you can t say? revealing that the consumer owes a debt when communicating with third parties.

11 Hot Topics Under the FDCPA Restrictions on communications with third parties. Validation Notice Issues Collecting Time-Barred Debt Collecting Debt from Deceased Borrowers

12 What About State Laws? Collection Agency and Debt Collection Laws Licensing Substantive Conduct Requirements Unfair and Deceptive Acts and Practices Acts Limitations Under Credit Statutes Other Topic-Specific Laws Telemarketing, Solicitation, ADAD Laws

13 Do I Need a License? Collection Agency and Debt Collection Laws They don t all mirror the FDCPA Are there exemptions that may apply? Financial Institutions What about subsidiaries?» Does the exemption only apply to in-state institutions? Out-of-State Collectors Affiliate Collections What type of debt are you collecting?

14 Do I Need a License? Difference between creditors and servicers. Difference between originators and debt buyers. What other licenses do you hold?

15 Do I Need a License? Are you directly or indirectly collecting a debt? Do you have any contact with the borrower? Do you furnish information to credit reporting agencies? Do you initiate legal actions against borrowers to enforce a debt?

16 Do I Need a License? Examples: Iowa ( UCCC ) Debt Collectors are required to file a notification. Iowa Code (2). Debt Collector means a person engaging, directly or indirectly, in debt collection, whether for the person, the person's employer, or others... Iowa Code (5).

17 Do I Need a License? North Carolina "Collection agency" means a person directly or indirectly engaged in soliciting, from more than one person delinquent claims of any kind owed or due or asserted to be owed or due the solicited person and all persons directly or indirectly engaged in the asserting, enforcing or prosecuting of those claims. N.C. Gen. Stat (a).

18 Do I Need a License? North Carolina Expressly includes debt buyers. Excludes entities which, for valuable consideration purchases accounts,, which are not delinquent at the time of such purchase, and then, in its own name, proceeds to assert or collect the accounts, claims or demands N.C. Gen. Stat (b)(10).

19 Do I Need a License? New Jersey No license but bond is required. Collection agency bond is required to engage in the business of collecting or receiving payment for others of any indebtedness, or engage in the business of soliciting the right to collect or receive payment for another of any indebtedness, or advertise for or solicit in print the right to collect or receive payment for another of any indebtedness, unless the person, or the person for whom he may be acting as agent. N.J. Rev. Stat. 45:18-1.

20 Nevada State Laws: Do I Need a License? "Collection agency" means all persons engaging, directly or indirectly, and as a primary or a secondary object, business or pursuit, in the collection of or in soliciting or obtaining in any manner the payment of a claim owed or due or asserted to be owed or due to another. Nev. Rev. Stat No servicer exemption similar to FDCPA.

21 Do I Need a License? Licensing Considerations: How long does it take to get a license? What is involved in getting a license? What are the penalties if I fail to get a license?

22 If I Don t Need a License Does that Mean I Don t Have to Worry About Complying? Even if a license is not required, you may be subject to the substantive conduct requirements. These requirements do not necessarily mirror the FDCPA. Could be more onerous or more favorable. FDCPA is not necessarily the most protective.

23 Substantive Conduct Regulation Licensing is just the beginning of the analysis. Several states regulate the conduct of consumer debt collection under different types of laws. Some states require entities exempt from licensure to comply with the substantive conduct requirements that apply to licensees. Other states have separate laws that apply to creditors and collectors who are not third party debt collectors

24 Substantive Conduct Regulation For example: Florida and California have substantive collection laws that apply to anyone collecting consumer debt. Florida Consumer Collections Practices Act The prohibited practices provision is not limited to licensees and states "In collecting consumer debts, no person shall..." Fla. Stat

25 Substantive Conduct Regulation California Rosenthal Act The Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code 1788 through , applies to any person who, in the ordinary course of business, regularly, on behalf of himself or others, engages in the collection of consumer debts. Cal. Civ. Code

26 Substantive Conduct Regulation Some states regulate collection activity within lending laws. UCCC states Louisiana Consumer Credit Law Limits communications with borrower after default and after cease communications demand. Different than FDCPA requirements.

27 Substantive Conduct Regulation Other states, like Massachusetts, regulate third party debt collectors separate and apart from creditors and other servicers.

28 Substantive Conduct Regulation Massachusetts What s all the hype? Third Party Debt Collection State and Regulations Regulated and Enforced by the Department of Banking UDAP Law quote Regulated and Enforced by the Attorney General Martha Coakley

29 Substantive Conduct Regulation 1974 Regulations initially promulgated. Relatively minor amendments thereafter until Rulemaking process begins. Late February 2012 Amended regulations posted on AG website. March 1, 2012 AG Press Release. March 2, 2012 Published in State Register; Amended Regulations Become Effective.

30 Substantive Conduct Regulation Why are the amendments so important? Change scope of regulations Change existing substantive regulations Impose onerous new requirements Many are similar to FDCPA provisions New to creditors and servicers Immediate effective date

31 Substantive Conduct Regulation What are the new requirements? Significant limitations on communications. New validation notice requirements. New disclosures for collecting time-bared debt. New limitations on what can be collected. New rules that impact policies and procedures generally.

32 Substantive Conduct Regulation Restrictions on communications: Limited to initiating 2 contacts in a 7 day period to the borrower s residential, cell phone or other personal number provided by the borrower. Includes calls and text messages. Focuses on initiating the contact.

33 Substantive Conduct Regulation Limits contacts with third parties. Distinguishes between others in the household of the borrower and third parties. Prohibits causing expense to any such person in the form of collect or long distance telephone calls, text messaging, download fees, data usage fees or other similar charges. Effectively prohibits calls to cell phones.

34 Substantive Conduct Regulation Validation notices Within 5 days of initial communication to collect a debt Debt defined as money or its equivalent which is, or is alleged to be, more than 30 days past due and owing, unless a different period is agreed to by the debtor... Unclear what unless means

35 Substantive Conduct Regulation Validation notice must include: The amount of the debt; The name of the creditor to whom the debt is owed; A statement that unless the debtor, within 30 days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the creditor; and A statement that if the debtor notifies the creditor in writing within 30 days after receipt of this notice that the debt, or any portion thereof is disputed, the creditor will obtain verification of the debt and provide the debtor, or any attorney for the debtor, additional materials.

36 Substantive Conduct Regulation If requested, the creditor must provide: All documents, including electronic records or images, which bear the signature of the debtor and which concern the debt being collected; A ledger, account card, account statement copy, or similar record, whether paper or electronic, which reflects the date and amount of payments, credits, balances, and charges concerning the debt, including but not limited to interest, fees, charges or expenses incidental to the principal obligation which the creditor is expressly authorized to collect by the agreement creating the debt or permitted to collect by law;

37 Substantive Conduct Regulation If requested, the creditor must provide: The name and address of the original creditor, if different from the collecting creditor; and A copy of any judgment against the debtor. If the creditor does not possess, have custody of, or control these materials, the creditor must cease collection of the debt until the creditor has made reasonable efforts to obtain the necessary information and provide this information to the debtor.

38 Substantive Conduct Regulation Time-barred debt requirements. Applies if the creditor knows, or has reason to know based on a good faith determination, is a time-barred debt. Applies if the creditor collects or attempts to collect payment or seeks or obtains from any person an admission, affirmation, acknowledgement of a new promise to pay, or any waiver of legal rights or defenses. Requires new disclosures.

39 Substantive Conduct Regulation New prohibition against collecting any amount (including interest, fees, charges or expenses incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law. Convenience fees?

40 Substantive Conduct Regulation New rules impact policies and procedures generally. Examples: Requires the disclosure of the telephone number and office hours of the creditor or his agents on all written communications to the debtor. Prohibits using any business, company or organization name other than the true name of the creditor s business, company or organization.

41 Substantive Conduct Regulation Will other states adopt statutes or regulations similar to the amended regulations in Massachusetts? More uniformity on the licensing level NMLS Organizations like CSBS CFPB UDAAP

42 Questions? Lauren Campisi McGlinchey Stafford PLLC (504)

RULES OF THE TENNESSEE COLLECTION SERVICES BOARD CHAPTER STANDARDS OF PRACTICE TABLE OF CONTENTS

RULES OF THE TENNESSEE COLLECTION SERVICES BOARD CHAPTER 0320-05 STANDARDS OF PRACTICE TABLE OF CONTENTS 0320-05-.01 Definitions 0320-05-.02 Acquisition of Location Information 0320-05-.03 Communication