Utah’s H.B. 20 Signed into Law, Reducing Red Tape for Debt Collection Agencies

In a significant boost to the financial services industry, Utah has taken major steps to streamline its debt collection bureaucracy — including the removal of criminal penalties for failure to comply with technical requirements.

Utah House Bill 20, titled “Collection Agency Amendments,” was signed into law last month and goes into effect May 3, 2023. It repeals nine statutes passed in the 1980s and 1990s, among them the requirement that collection agencies register with the Utah Division of Corporations and Commercial Code — a process that has historically entailed numerous registration forms and fees. Also among the repealed statutes are provisions imposing bond requirements and record-keeping mandates, as well as restrictions on the assignments of debts. Previously, failure to comply with these red-tape-like statutes was a class A misdemeanor; now that criminal penalty has been repealed as well.

After May 3, the only collection agency statute that will remain from Title 12 of the Utah Code governs the limitations and terms of collection fees and convenience fees imposed by creditors or third-party debt collection agencies. See Utah Code Ann. § 12-1-11.

Utah legislators who shepherded the bill’s passage included bill sponsor Representative Cory Maloy (R) who argued that the bill “takes out some of the redundancy in regulations that are not used or not necessary.” The floor sponsor in the Utah Senate, Senator Curtis Bramble (R) characterized the repealed statutes as “extraneous.”

Extraneous and redundant they may be, but the statutes’ repeal is expected to have an immediate impact on a cottage industry that has sprung up among enterprising plaintiffs’ attorneys, who have seized on technical or borderline violations of the statutes to file lawsuits against debt collectors on behalf of individual debtors and even, occasionally, putative classes. As a consequence of the repeal, such lawsuits may no longer be viable in Utah.