In recent years, the market for purchasing debt has grown significantly. As more entities
engage in this lucrative market, asset
buyers continue to gain attention in
the collection industry. Specifically,
asset buyers have caught the attention
of state regulators and other licensing
authorities, and several states and
cities have recently enacted legislation
significantly affecting asset buyers.
Arkansas, New York City, Maryland
and North Carolina have all enacted
legislation within the past year aimed at
regulating asset buyers.
The passage of Arkansas House
Bill 2228 established a state Fair Debt
Collection Practices Act and required
asset buyers to obtain a license in
order to operate in the state. The new
law expands the prior definition of
“collection agency” to include “any
person, partnership, corporation,
association, limited liability corporation
or firm that purchases and attempts to
collect delinquent accounts or bills.”
Additionally, the bill broadened
state licensing requirements, making
it unlawful to “purchase and attempt
to collect delinquent accounts or bills”
without first obtaining a license from the
State Board of Collection Agencies.
Similarly, New York City Local
Law No. 15 amended the city’s
administrative code concerning
licensing and collection requirements
for third-party collection agencies and
asset buyers. The new law requires
asset buyers to obtain a license to
operate in the city and imposes
additional restrictions on collection
of debt. Asset buyers that purchase
delinquent debt and seek to collect
the debt either directly or through the
services of another must obtain a debt
collection agency license.
The trend of increased regulations
for asset buyers has also carried over
to the medical field. In response to an
exposé released by a local newspaper,
the state of Maryland recently passed
Senate Bill 776. The new law requires
hospitals provide for active oversight of
any contract for the collection of debts
on behalf of the hospital and prohibits
any hospital from selling debt.
Effective Oct. 1, 2010, North
Carolina Senate Bill 974 severely
limits an asset buyer’s ability to collect
consumer debts. The bill amends
the definition of collection agency
and defines a debt buyer as a person
or entity engaged in the business of
purchasing delinquent or charged-off consumer loans or consumer
credit accounts, or other delinquent
consumer debt for collection purposes,
whether it collects the debt itself or
hires a third party for collection or an
attorney-at-law for litigation in order to
collect such debt. Under the new law,
purchasers of delinquent or charged-off consumer debts are classified as a
collection agency, regardless of whether
the purchaser engages in any direct
collection activity.
The new law prohibits debt buyers
or an entity acting on behalf of a debt
buyer from attempting to collect a debt
from a consumer or initiating arbitration
without valid documentation the debt
buyer is the owner of the specific debt
or account at issue and reasonable
verification of the amount of the debt
allegedly owed by the consumer.
Reasonable verification includes:
Documentation of the name of the 1.
original creditor;
The name and address of the 2.
consumer as appearing in the original
creditor’s records;
The consumer’s original account 3.
number;
A copy of the contract or other 4.
document evidencing the consumer
debt; and
An itemized account of the amount 5.
p p o any contract for the collection of debts on behalf of the hospital and prohibits any hospital from selling debt. Effective Oct. 1, 2010, North
Due to the increasing number of
changes in state law, it is important
for asset buyers to carefully review state
laws and regulations to ensure compliance.
claimed to be owed,
including all fees and
charges.
Senate Bill 974 also places
considerable restrictions on asset buyers
who wish to file suit on or initiate
arbitration against a consumer. The
debt buyer must give the consumer
written notice of its intent to file suit or
initiate arbitration 30 days prior to the
filing. The required notice must include
specific information about the account,
including an itemized accounting of
amounts claimed and a copy of the
underlying contract evidencing the
consumer’s debt.
The bill deems it an unfair practice
for a debt buyer or collection agency
on behalf of a debt buyer to bring suit,
initiate arbitration, or otherwise attempt
to collect a debt when the debt buyer
or agency knows or reasonably should
know such collection is barred by the
applicable statute of limitations.
The bill also requires a receipt be
provided to the consumer when any
payment is received by a debt buyer
or on behalf of a debt buyer. Prior to
enactment of the bill, a receipt was only
required for cash payments. The receipt
must state the creditor’s name, including
the original creditor, the account
number and the status of the consumer’s
account.
Although a significant amount of
legislation has been passed imposing
increased regulations on asset buyers, a
few states such as Oregon and Tennessee
have enacted legislation favorable to
asset buyers.
The Oregon State Legislature
recently enacted Oregon House Bill
2307, effective Jan. 1, 2010. The portion
of the bill specific to asset buyers
provides a person is not a collection
including all fees and charges. Senate Bill 974 also places considerable restrictions on asset buyers
November 2009 Collector I 25
