In an April 1, 2016 letter the Massachusetts Division of Banks (Division) has reversed its position regarding licensing of law firms as debt collectors in the state.  The Division now says that a Massachusetts law firm and/or other similarly situated law firms will not need to become licensed to engage in debt collection in the Commonwealth.

The April 1 letter was issued to the law firm of Lustig, Glaser &Wilson, P.C. (LGW) in response to a request for an opinion relative to whether LGW would be required to obtain a debt collector license from the Division in order to engage in consumer debt collection activity in the Commonwealth. The requests for an opinion go back to correspondence from LGW on September 19, 2013 and October 21, 2013.

The road to this April 1 opinion has been long and had several twists and turns. First, the Division waited almost 2 years before initially responding to the LGW request. On November 2, 2015 (Opinion No. 13-018) the Division determined that LGW would, in fact, need to be licensed as a debt collector based on the activities specified in their request for an opinion. Then, approximately two months ago, on February 11, 2016, the Division issued further clarification on that November 2, 2015 opinion (Opinion No. 16-002), but did not change the fact that they felt the law firm needed to be licensed as a debt collector.

In December of 2015 LGW filed an action in Suffolk County Superior Court seeking Declaratory Relief regarding the licensing issue. LGW requested an Order that the law firm was not a “debt collector” that needed to be licensed.

The Division filed its Answer on January 29, 2016.

On February 24, 2016 LGW filed a Motion for Judgment on the Pleadings.

On April 1, 2016 the Division filed a Motion to Extend the time to Answer the LGW motion.

On that same day, the Division issued their opinion that LGW will not need to become licensed.

The earlier opinions (Nos. 13-018 and 16-002) are withdrawn by the April 1 letter.  The relevant portion of the latest letter reads as follows:

Since the issuance of the November 2″d letter, the Division has reconsidered its recent interpretation of the attorney-at-law exemption set forth at Mass. Gen. Law ch. 93, § 24. As a result of the Division’s further consideration of the statutory language of ch. 93, § 24, the Division has determined that it will withdraw its November 2nd opinion (and its related follow up opinion dated February 11, 2016) as of today’s date. Therefore, the Division will not require LGW, or other similarly situated law firms, to become licensed solely because LGW is primarily engaged in consumer debt collection or regularly collects consumer debt. As this appears to be the question you presented in your September and October of 2013 correspondence, the Division has determined that this is responsive to your request.

insideARM Perspective

insideARM contacted LGW for comment. Kenneth C. Wilson, the firm’s Managing Attorney responded:

 “What we thought was a simple, straight forward issue resulted, two years later, in a response that was totally unanticipated and we believe clearly contrary to the legislature’s intent and the Division’s own regulations.”

“While our attempts to convince the Division to change its position regarding attorney licensing both before the November Opinion Letter issued and then prior to our initiation litigation seeking declaratory relief failed, we are very pleased that the Division has now re-considered its position and rescinded the requirement.”

The latest opinion is good news for LGW and “other similarly situated law firms.” However, the first question to be considered is, What is the definition of “other similarly situated law firms?” It seems likely that law firms from outside the Commonwealth must still be licensed as they are “not similarly situated.” What is not clear is whether firms located outside the Commonwealth, but with member attorneys licensed to practice law in the Commonwealth, will be subject to licensing.

This single issue seems to have been a gigantic waste of time and resources.  What is fascinating is that if you go to the Banking Division website you will find a link to a 2006 Opinion Letter (Opinion 06-059) that discussed and resolved the attorney exemption to the debt collector licensing requirement ten years earlier.

There is no reference to the three opinion letters in this case connected to that 2006 opinion.