Debt Buyers Must Now be Licensed in Massachusetts

On June 16, 2006, the Massachusetts Division of Banks issued a letter to clarify its position on ?whether a person collecting subsequently acquired debt [debt buyer] is required to be licensed as a debt collector.? This letter was needed because of substantial revisions to Massachusetts? Debt Collection Law and its accompanying regulations, which were modeled after the federal Fair Debt Collection Practices Act (FDCPA) and incorporate the FDCPA?s definitions of ?debt? and ?debt collector.?

After these revisions were implemented, the division received questions asking who was considered a ?debt collector.? Specifically, the questions pertained to persons purchasing debt from another that was in default at the time of purchase or acquisition. Prior to the amendments, the division?s position was that licensing was not required for those who collected on their own debts, whether the debt was in default at the time of purchase or acquisition, or not. Therefore, debt buyers were not required to obtain a debt collection license from the division.

However, the division?s letter states that debt buyers will no longer be exempt from licensure in Massachusetts when they meet the definition of ?debt collector.? The division reasons this conclusion by stating that the definitions contained in its Debt Collection Law are similar to those of the FDCPA. When interpreting the term ?debt collector? under the FDCPA, federal courts have ruled that debt buyers fall under this definition and are therefore subject to the FDCPA. The division believes it should also follow the interpretations of the federal courts and include debt buyers in its interpretation of ?debt collector.? Accordingly, debt buyers who meet the definition of ?debt collector? will now be subject to the Debt Collection Law and will be required to obtain a license from the division in order to collect on debts in Massachusetts that arise out of a transaction primarily involving personal, family or household purposes.

The divisions application for a debt collector license and all related documents can be found on the division?s Web site under Industry Services. To view the division?s letter in its entirety, ACA members may access E-Compliance Document # 423.

This article is provided as a service of ACA International?s Legal and Government Affairs Department.

© 2006 ACA International. All Rights Reserved. Reprinted with the express written permission of ACA International.