RMA is currently tracking more than 190 bills at the state level that impact the receivables industry in both positive and negative ways. Here are a few noteworthy bills that have had recent activity:
Connecticut HB 5490 – This is an omnibus banking law bill introduced by the Joint Committee on Banking. The provisions impacting the collection industry can be found in sections 78 and 79 of the bill. The bill would: (1) authorize the Banking Department to use the Nationwide Multistate Licensing System (NMLS) to license consumer collection agencies (a very common development as more states are joining NMLS to streamline their licensing requirements); (2) clean up how debt buying companies are referenced in parts of the Consumer Collection Agency Act (technical non-substantive amendments); and (3) exempt debt buying companies from the requirement of maintaining a minimum tangible net worth of fifty thousand dollars.
Connecticut HB 5491 – This bill would impose an automatic $1,000 exemption on garnishments of consumer bank accounts. [RMA opposes this bill as the average bank garnishment is below the $1,000 threshold, thereby effectively ending this practice in CT.]
Illinois HB 5480, HB 5483, HB 5484, HB 5485, HB 5486, and HB 5487 – This is a package of consumer protection bills that would significantly impact the collection of defaulted accounts in Illinois. [RMA opposes these bills and is working with a coalition of industry participants to kill or amend them. RMA understands that portions of these bills are likely to be combined into a single legislative proposal that will become the focus of passage by consumer advocates.]
Massachusetts HB 1982 – This bill would require passive debt buyers to be licensed as debt collectors in Massachusetts. Currently, third party collection agencies and active debt buyers are regulated and licensed by the Massachusetts Division of Banks while passive debt buyers are regulated by the Attorney General’s Office and not required to be licensed. This bill would also exempt debt buying companies from bonding requirements and allow affiliated companies to be licensed under a single license and subject to a single examination [RMA has been advocating for uniformity and consistency in state licensing laws. Maintaining the Massachusetts bifurcated regulatory scheme does not make sense and adds to industry and consumer confusion. RMA has retained a Massachusetts lobbyist to assist us in our efforts. RMA testified in support of this bill at a legislative hearing in Boston on September 26th. There was no opposition to the bill. The bill was unanimously reported out of committee with the recommendation to pass on 2/7/18.]
Massachusetts SB 120 – This bill among other things would: (1) reduce the statute of limitations in an action for the collection of a consumer debt from six to four years to be measured from the earlier of the date of charge-off, placement for collection, or 180 days after the last regular payment; (2) prohibit payments made prior to the limitations period expiring from tolling the statute; (3) prohibit any attempt to collect a consumer debt once the statute of limitations has expired but would allow a debt collector to accept an unsolicited voluntary consumer payment on a debt; (4) extinguish judgments after five years unless the creditor takes action to enforce the judgment; and (5) reduce the percentage that is subject to wage garnishment. [RMA has retained a lobbyist to oppose the bill in its current form. RMA testified in opposition of this bill at a legislative hearing in Boston on September 25th. The bill was reported out of committee to the Ways & Means Committee on 12/18/17.]
Rhode Island HB 7929 – Creates the “Expired Debt Act” which would among other things: (1) prohibit consumer contact until the collector “possesses verifiable information documenting” chain of title, the amount of the debt, and the connection of the debtor to the debt; (2) require consumer notices on out of statute debt in every communication when the debt is beyond the statute of limitations; (3) prohibits default judgments on out of stat debt; and (4) provides damages for mental distress and emotional anguish. [RMA opposes this bill in its current form. RMA testified in opposition to the bill during committee testimony on April 11th—the bill was held in committee for further study.]
Tennessee SB 2514 – This bill was signed into law on April 3, 2018. This law would prohibit health care providers from soliciting victims of an accident or disaster for 30 days. Any agreement entered into within the first 30 days to pay a health care provider for services that were rendered in violation of the act will be void and unenforceable. No person may collect or pursue collection for any debt arising from such an agreement. A patient or person who paid on behalf of a patient is entitled to a complete refund of any money paid for services that were rendered by a health care provider as a direct result of a violation of the act.
Vermont HB 482 – This bill would among other things: (1) reinforce the six year statute of limitations on credit card debt and thereby eliminate any possible use of a borrowing statute or choice of law in Vermont; (2) prohibit filing litigation on a credit card debt that is beyond the statute of limitations; (3) prohibit a payment on a credit card debt that is made after the statute of limitations has expired from reviving the statute; and (4) require a consumer notice when collecting on debt that is beyond the statute of limitations. [RMA retained a lobbyist and testified in opposition to a prior harmful version of the bill. Through active negotiations, RMA was able to eliminate the following provisions from the bill; (i) a prohibition on debt collectors contacting consumers after the statute of limitations expired; (ii) a reduction of the statute of limitations from six to three years on credit card debts; and (iii) the establishment of a new civil penalty.]
If you are interested in obtaining a copy of the RMA state tracking list, please contact David Reid at email@example.com.
Mass. SJC Holds Passive Debt Buyers Are Not ‘Debt Collectors’ Under State Law
Dorrian v. LVNV Funding, LLC, Mass. Supreme Judicial Court, SJC-12355 (April 9, 2018)
In an important decision for the debt buying industry, the Massachusetts Supreme Judicial Court held that passive debt buyers are not “debt collectors” under the Massachusetts Fair Debt Collection Practices Act (MDCPA).
A copy of the decision in Dorrian v. LVNV Funding, LLC is available at: Link to Opinion.
An amicus brief filed by Receivables Management Association International in support of the appellant is available at: Link to Amicus Brief.
In Massachusetts, “debt collectors” must obtain a license from the Division of Banks, the state agency tasked with regulating debt collection in the Commonwealth. Under the MDCPA, an entity is a debt collector if (1) it is engaged in a “business the principal purpose of which is the collection of debt,” or (2) it “regularly collects or attempts to collect, directly or indirectly, a debt owed or due…another.” G.L. c. 93, § 24.
In 2012, a debt buyer inquired with the Division whether a license was necessary for a company that “does not have employees or interact with consumers directly” but instead “contracts with licensed third-party debt collectors and law firms to service accounts on its behalf.”
The Division responded that it was not necessary, referencing its long-standing position held since 2006 that passive debt buyers that purchase debt, but do not directly engage in the collection of the purchased debt, are not required to obtain a debt collector license provided that all collection activity performed on behalf of such debt buyers is done by a properly licensed debt collector or a licensed attorney.
Subsequently, a licensed debt collector filed lawsuits and obtained judgments against the plaintiffs on the debt buyer’s behalf. Thereafter, the plaintiffs each sued the debt buyer on behalf of themselves and all others similarly situated, seeking declaratory and injunctive relief, and alleging that the debt buyer was operating as a debt collector without a license in violation of the MDCPA, was unjustly enriched and violated the Massachusetts consumer protection statute, G.L. c. 93A.
On appeal, the SJC concluded that passive debt buyers do not fall within either of the two separate definitions of “debt collector” contained in the MDCPA. Specifically, passive debt buyers do not fit within the first definition because their “principal purpose” is not the “collection of debt.”
In reaching this conclusion, the SJC noted that, because this first prong of the definition is not “plain and unambiguous” as it applies to passive debt buyers, the Court must look to the legislative history on the development of the MDCPA. However, because the legislative history of the MDCPA is essentially silent on the Legislature’s intent, the Court analyzed the history of the FDCPA, in which the MDCPA was modeled and largely follows, concluding that “there is no evidence that Congress ever intended to include within this definition debt buyers that own the debts but use a third party to collect the debts and therefore have no contact with the debtors.”
Further, the Court concluded that passive debt buyers do not “regularly collect or attempt to collect, directly or indirectly, debts owed or due” to another. Adopting the interpretation of the United States Supreme Court in Henson v. Santander Consumer USA, Inc., 137 S. Ct. 1718, 1721-1722 (2017), the SJC concluded that passive debt buyers are not “debt collectors” under the second prong of the definition because they deal with debts that they own instead of debts owed to another.
Accordingly, the SJC vacated the judgment of the lower court.
The decision should not be construed to mean that passive debt buyers are not regulated under the MDCPA and Massachusetts debt collection regulations, which treats passive debt buyers as creditors and continues to regulate their conduct as such.
7th Cir. Holds Debt Collector May Rely on Information Received from Creditor for Verification under FDCPA
Walton v. EOS CCA, Seventh Circuit Court of Appeals, No. 17-3040 (March 21, 2018)
Joining the Fourth, Eighth and Ninth Circuits, the U.S. Court of Appeals for the Seventh Circuit recently found that a debt collector complies with the verification requirements of § 1692g(b) of the federal Fair Debt Collection Practices Act (FDCPA) by only verifying the information in its records instead of contacting the creditor to verify the debt.
In so ruling, the Court also held that the debt collector did not violate the federal Fair Credit Reporting Act (FCRA) because it conducted a reasonable investigation into the disputed information.
A copy of the opinion in Walton v. EOS CCA is available at: Link to Opinion.
The debtor argued that § 1692(g) required the debt collector to verify “the accuracy of the underlying debt.” She maintained that the debt collector was obliged to contact the creditor “to confirm whether the account number was hers and thus whether she really owed” the debt. In response, the debt collector argued that § 1692(g) only pertains to “the accuracy of its collection notice.” Thus, it only needed to confirm that its notice to the debtor matched the description of the debt and the debtor that the creditor provided to the debt collector.
The Seventh Circuit agreed with the debt collector and explained that the verification lets a consumer know that the creditor “made the demand the debt collector said it did” and allows the consumer to determine whether the creditor is correct. Further, in the Seventh Circuit’s view, it would be “burdensome and significantly beyond the Act’s purpose to interpret § 1692g(b) as requiring a debt collector to undertake an investigation into whether the creditor is actually entitled to the money it seeks.” This is because § 1692g(b) serves as a check on the debt-collection agency, not the creditor.
The Seventh Circuit thus joined “other circuits in holding that the statute requires nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed.’” Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999); Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1173-74 (9th Cir. 2006). In this appeal, the debt collector “plainly satisfied § 1692g(b)” because it reviewed its records and confirmed that it sent its debt-collection letter seeking the amount the creditor sought to the same debtor the creditor identified. The notice also included the creditor’s address and contact information. Thus, the verification provided the debtor with the necessary information to “sufficiently dispute the payment obligation.” Dunham v. Portfolio Recovery Assocs., LLC, 663 F.3d 997, 1004 (8th Cir. 2011). The Seventh Circuit observed that this happened here as the debtor used the information provided in the § 1692g(b) notice to dispute her debt. As a result, “she succeeded in having the debt record deleted.”
2nd Cir. Cleans Up Interest Disclosure Mess, Affirms Taylor
Taylor v. Financial Recovery Services, Second Circuit Court of Appeals, No. 17‐1650 (March 29, 2018)
Just over two years to the day after it issued its opinion in Avila v. Riexinger & Associates, LLC, the Second Circuit Court of Appeals has issued a critical blow to a recent spate of FDCPA lawsuits attempting to create liability out of thin air. A copy of the opinion in Taylor v. Financial Recovery Services is available at: Link to Opinion.
In Avila, the Second Circuit held that a debt collector violates the FDCPA by stating the “current balance” of a consumer’s debt without disclosing that the balance is increasing due to the accrual of interest or fees. In Avila, the debt at issue was actually accruing interest at a rate equivalent to 500% per year. The Avila opinion adopted the same safe harbor approach in the Second Circuit that the Seventh Circuit adopted 16 years earlier in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, LLC. Like Miller, Avila suggested a disclosure that interest was accruing and that so long as that disclosure was used (or something similar) there would be no liability. What Avila did not hold however was that a debt collector was required to affirmatively state that interest had been waived or was otherwise not accruing.
Nevertheless, sophisticated consumers in the Second Circuit (primarily in the Eastern and Southern Districts of New York) seized upon this nonmaterial minutiae and repaired to their lawyers’ offices en masse to file reverse-Avila cases. The argument was that the debt collector violated the FDCPA by failing to inform the debtor that interest was not accruing. The glut of cases was immediate and although collectors were generally successful in motions for summary judgment, the problem was that this claim could not be dismissed on a rule 12(b)(6) motion because plaintiffs pleaded that interest was actually accruing. The facts of Taylor are similar and the debt collector sent a series of letters to the debtor, all of which demanded the same balance that never increased due to the imposition of interest or fees. Discovery produced unrebutted evidence that the debt had not accrued interest or fees and the collector moved for summary judgment arguing that there was no obligation to affirmatively state that neither interest nor fees were accruing. The district court agreed and granted summary judgment.
The plaintiffs argued that the collection letters were misleading however because without a disclaimer regarding interest, the least sophisticated consumer could interpret the letters to mean either that interest and fees were accruing or that interest and fees were not accruing and one of those interpretations necessarily has to be false. They argued that Avila supported this interpretation.
The Second Circuit disagreed and referred back to the source of this problem, the actual facts of Avila, which were that interest was in fact accruing and thus “a reasonable consumer could read the notice and be misled into believing that she could pay her debt in full by paying the amount listed on the notice, whereas, in reality, such a payment would not settle the debt.” Here, however, on the facts of this case, the statement “was accurate: prompt payment of the amounts stated in [plaintiffs’] notices would have satisfied their debts.” This is true in all of these reverse-Avila cases: prompt payment of the amounts stated will satisfy the debts.
The Second Circuit took it one step further though and noted that disclosing that interest was not accruing could have been advantageous to the debtors as it would have alerted them that they could delay repayment without their debts increasing. Thus “it is hard to see how or where the FDCPA imposes a duty on debt collectors to encourage consumers to delay repayment of their debts.”
The Second Circuit joined the Seventh Circuit once again and held that “a collection notice that fails to disclose that interest and fees are not currently accruing on a debt is not misleading. . . . if instead the notice contains no mention of interest or fees, and they are accruing, then the notice will run afoul of [the FDCPA].”
The Second Circuit also rejected the speculative argument that even though the current debt collector was not accruing interest or fees, they (or their successor) retained the right to do so and thus the letter was still false. But reading the letters at issue like a normal person as opposed to the astuteness of a Philadelphia lawyer, the Court held that the plaintiffs could have satisfied their debts by making reasonably prompt payment of the amounts stated in the notices and thus they were not mislead.
On March 1, RMA adopted version 6.0 of the Receivables Management Certification Program, making significant enhancements, including Certification for Canadian debt buying companies [Appendix C]. Be sure to check out version 6.0 to see if any of the changes apply to your company!
Need live/in person continuing education credits for certification? Members who are seeking to earn live credits in order to obtain RMA’s Certified Receivables Compliance Professional (CRCP) designation can do so at the upcoming Executive Summit, July 31–August 2, 2018 at the Cliff House Maine in Cape Neddick, ME. You can also contact one of our Authorized Education Providers who may have a live seminar in your area. Be sure to check out the certification tab on our website.
Congratulations to our new and renewed companies and individuals!
PCA Acquisitions V, LLC
The Bureaus, Incorporated
Unifund CCR, LLC
Joe Hankins, Collection Advisor, Transunion
Jorge Garcia, Chief Compliance Officer, PMGI, LLC
Nicole Green, Compliance Manager, Cascade Capital, LLC
Jake Jones, Senior Director, Compliance & Process Improvement , Resurgent Capital Services
Jenna Wilmes, Chief Compliance Officer, Full Circle Financial Services, LLC
Alek Newman, Chief Compliance Officer, NorAm Capital Holdings Inc
Anne Thomas, Chief Compliance Officer, Cavalry Portfolio Services LLC
Anthony Kuhns, Chief Compliance Officer, Convergence Acquisitions, LLC
Debra Tucker, Manager – Audit & Compliance, Crown Asset Management, LLC
Kevin Luebke, President/Salesperson, Southern Capital Finance Group, LLC
Nicole Gelinas, National Sales Manager, Lawgix Lawyers, LLC
Richard Segol, President, Alliance Credit Services Inc
View all certified companies and certified individuals on our website.
For help with certification, contact Michelle Wren at (916) 482-2462 or firstname.lastname@example.org.
Welcome new RMA members!
The RMA membership continues to grow. Welcome to our newest members:
31 Capital Advisors – Originating Creditor
Advance America – Originating Creditor
Advancial Federal Credit Union – Originating Creditor
Applied Data Finance – Originating Creditor
BBVA Compass – Originating Creditor
Coalesce Payments – Affiliate
Emergent Business Group, Inc. – Associate Debt Buyer
Enformion – Affiliate
Finmax Smart Capital, LLC – Associate Collection Agency
Keith D. Weiner & Associate Co., LPA – Associate Law Firm
LaVerne D. Long-Daniels, LLC – Associate Law Firm
List & Associates, LLC – Associate Law Firm
MoneyKey – Originating Creditor
National Recovery Associates, Inc. – Associate Collection Agency
Nextep Funding, LLC – Originating Creditor
Paramount Recovery Systems – Associate Collection Agency
Payfully Corporation – Originating Creditor
Samuel E. White, P.C. Associate Law Firm
Stratus Payment Solutions – Affiliate
Vinci Law Office, LLC – Associate Law Firm
Zarzaur & Schwartz, P.C. – Associate Law Firm
Read more about these members and other members on the Member Search page
Smaller RMA members — Looking for an HR Resource?
RMA is entering into a partnership with Insperity, a PEO. Insperity provides HR resources to small businesses and delivers first-class HR services, support and technology. They also are part of RMA’s newest members! Find out how our partnership with them will help you by clicking here, and you can also read their blog.
What is a PEO?
A professional employer organization (PEO) is a firm that provides a service under which an employer can outsource employee management tasks, such as employee benefits, payroll and workers’ compensation, recruiting, risk/safety management, and training and development.
Full details about this new member benefit will soon be shared with all members, but in the meantime for questions, contact Jason Litchney, RMA’s Director of Marketing & PR, email@example.com.
State Licensing Information Now Available
State-by-state licensing information is vital to your compliance efforts and business success. Affiliate member Cornerstone Support has generously partnered with RMA to provide members updated, accurate information on licensing laws and requirements in each U.S. state. Access on the RMA website (requires member log-in).
Beware Name and Web Domain Scams
RMA wants to remind its members to always perform their due diligence when purchasing and selling accounts or providing accounts to a third-party collector. Scammers are all around us. Did you know that some scammers will create fake domains and email addresses that are almost identical to legitimate companies, copy the company’s logo and branding, and then impersonate one of their employees in order to obtain a portfolio of accounts? Some of these imposters may even be fraudulently using RMA Certification numbers in their email signature blocks. So be careful out there and do your homework to always make sure the person you are communicating with is, in fact, that person.