2013 Regulations Update
Texas & Massachusetts
In 2013, the State of Texas and the Commonwealth of Massachusetts adopted regulatory changes impacting the collection industry that all members should be aware of if their account portfolios include accounts located within these jurisdictions. Please take a minute to familiarize yourself with their requirements.
TEXAS
On April 15, 2013, the Supreme Court of Texas adopted amendments to the Rules of Civil Procedure that took effect on all Justice Court cases filed on or after August 31, 2013, as well as cases pending on that date unless the court decides implementation would not be feasible or would result in an injustice. Specifically, Rule 508 created special rules that applied exclusively to claims associated with debt collection. Here is a summary of Rule 508:
- Petitions on Credit Accounts. All claims based on a credit card, revolving credit, or open account must state: (1) the account name or credit card name; (2) the account number (which may be masked); (3) the date of issue or origination of the account, if known; (4) the date of charge-off or breach of the account, if known; (5) the amount owed as of a date certain; and (6) whether the plaintiff seeks ongoing interest.
- Petitions on Personal and Business Loans. All claims based on a promissory note or other promise to pay a specific amount must state: (1) the date and amount of the original loan; (2) whether the repayment of the debt was accelerated, if known; (3) the date final payment was due; (4) the amount due as of the final payment date; (5) the amount owed as of a date certain; and (6) whether plaintiff seeks ongoing interest.
Ongoing Interest. All petitions seeking ongoing interest must state: (1) the effective interest rate claimed; (2) whether the interest rate is based upon contract or statute; and (3) the dollar amount of interest claimed as of a date certain. - Assigned Debt. All petitions where the claim has been assigned or transferred must state: (1) that the debt claim has been transferred or assigned; (2) the date of the transfer or assignment; (3) the name of any prior holders of the debt; and (4) the name or a description of the original creditor.
- Default Judgments. Judges are to “promptly render a default judgment” when a defendant does not answer a claim or appear in the case provided that: (1) evidence of the plaintiff’s damages must be provided in petition, service, or submitted to the court; (2) evidence (including documentary evidence) must be offered in a sworn statement or live testimony; (3) the amount of damages are established; (4) if documentary evidence is used, it must be through a sworn statement of the plaintiff, a prior holder of the debt, or the original creditor; and (5) a judge does not have to accept a sworn statement if the source of information or the method or circumstances of preparation indicate a lack of trustworthiness.
- Documentary Evidence Offered By Sworn Statement. The sworn statement for the use of documentary evidence must attest to the following: (1) the documents were kept in the regular course of business; (2) it was the regular course of business for an employee or representative with knowledge of the act recorded to make the record or to transmit information to be included in such record; (3) the documents were created at or near the time or reasonably soon thereafter; and (4) the documents attached are the original or exact duplicates of the original.
- Consideration of Sworn Statement. A judge may not reject a sworn statement only because it is not made by the original creditor or because the documents attested to were created by a third party and subsequently incorporated into and relied upon by the business of the plaintiff.
You can access the Texas rules by clicking here.
MASSACHUSETTS
On Friday, October 11, 2013, the Massachusetts Department of Banking (DOB) adopted revisions to the regulations governing licensed debt collectors in the Commonwealth. Please note that in Massachusetts active debt buyers are licensed as “debt collectors” which come under the authority of DOB while passive debt buyers are regulated by the Attorney General as “creditors”. These regulations took effect immediately upon adoption.
Most of the Massachusetts regulatory revisions can best be described as clarifying amendments to existing regulatory provisions but a closer review may be warranted. Here is a summary of the changes:
- Definition of Debt Collector. Amends the definition of “debt collector” to include any entity that “buys or acquires debt that is in default at the time of purchase or acquisition and who seeks to collect such debt directly” (emphasis added). This change merely adopts a 2006 DOB opinion letter and should not result in any operational changes.
- Attorney Exemption. Refines the exemption for “attorneys-at-law” in the definition of debt collector by clarifying that it only applies to those attorneys licensed to practice law in Massachusetts.
- Audited Financial Statements. Adds a provision that states that the Commissioner may deny the renewal of a “debt collector” license if it contains a notation by an independent certified public accountant that raises doubt about the entity’s “ability to continue as a going concern.”
- License Posting. Deletes the requirement that a license be posted at the place of business.
- Notice of Change. Adds the “closing or shortage of any trust account” to the list of events that must be reported to the Commissioner.
- Location Information. Adds to the list of prohibited activities the causing of an expense to any person contacted to obtain “location information” about the consumer.
- Text Messaging. Adds text messaging to the current limitations in place that limits telephone consumer communications.
- Unfair Practices. Adds the following to the list of unfair practices: (1) taking or threatening to take any non-judicial action to effect dispossession of property if (a) the property is exempt or (b) demands for payment or legal notices were not directed to the consumer’s “last known address” and (2) causing expense to any consumer in the form of collect telephone calls, text messaging, download fees, data usage fees, or similar charges without the express permission of the consumer to communicate in that manner (exempted from this provision are non-collect telephone calls to a consumer’s cellular telephone provided by the consumer as his/her personal telephone number).
However, in addition to the above changes that apply to all debt collectors, the regulation also
contains more substantive reforms that apply only to third-party loan servicers (section 18.21) and
mortgage loan servicers (section 18.21A). If you engage in these areas, you should be aware of
these changes and how they may impact your operations.
You can access the Massachusetts regulations by clicking here.