May 7, 2021
|The Nebraska Legislature earlier this year passed a bill (LB 343) at the request of the Nebraska Department of Banking & Finance (Department) that was designed to update various licensing laws under the Department’s purview. This bill was signed into law on March 17, 2021 and took effect immediately.|
Among the many provisions in the bill were amendments to the Installment Sales Act (sections 25 and 26 of the bill) and the Installment Loan Act (sections 27 and 28 of the bill). Both the Installment Sales Act and the Installment Loan Act require a state license if a business falls within their definition. LB 343 added language which creates some ambiguity and could potentially subject some debt buying companies, depending on scope of business practices, to licensure under the acts. RMAI had a discussion with the Department and they confirmed that the text was not amended for the purpose of requiring debt buyers to be licensed; however, they understood how it could be read that way.
On April 19, 2021, the Department issued a formal Industry Advisory Notice stating:
A properly licensed debt collection agency is not required to be licensed under the Acts due to the changes contained in LB 363, for conducting activities that are covered by such debt collection agency licensure. However, licensure under the Acts may be required where such an agency conducts business beyond the scope of such debt collection agency license that includes licensable business activity under the Nebraska Installment Sales Act or the Nebraska Installment Loan Act. (emphasis added)
While this text at first sight might offer some comfort to debt buyers that are licensed as collection agencies in Nebraska, the concern is whether the definition of “collection agency” in the Nebraska Collection Agency Licensing Act is broad enough so that debt buying “activities” are included within its scope or whether some or all debt buying activities could be interpreted to be “beyond the scope” of the collection agency license. Complicating the matter is an exemption in the collection agency definition which reads: “Collection agency does not mean or include . . . a person, firm, corporation, or association which, for valuable consideration, purchases accounts, claims, or demands of another and then, in such purchaser’s own name, proceeds to assert or collect such accounts, claims, or demands.”
RMAI recommends that debt buying companies that purchase and/or collect on Nebraska installment sales or installment loan accounts consult with legal counsel on how best to proceed. While LB 343 took effect immediately upon its signing, the April 19th Department Advisory provides that those now subject to the licensing requirements are allowed to file an application for a license on the Nationwide Mortgage Licensing System (NMLS) by October 1, 2021.