Debt collection regulations issued by the Massachusetts Attorney General (MAG) have been revised to expand their coverage to include collection of debts owned by passive debt buyers and to impose significant new obligations on persons subject to those regulations. The revisions, announced in an MAG press release, became effective on March 2, 2012.
The debt collection industry, and creditors attempting to collect their own debts, are currently experiencing the spread of documentation-related challenges used in mortgage foreclosures to collection actions involving credit card, student loan, and other types of non-mortgage consumer debts. To assist clients in making a proactive response to such challenges, Ballard Spahr has created a Collection Documentation Task Force that brings together litigators with experience defending mortgage lenders and other consumer lenders in documentation-related lawsuits nationwide and regulatory lawyers with deep knowledge of the Office of the Comptroller of the Currency’s national bank foreclosure review process and federal and state debt collection laws.
As revised, the MAG regulations define “creditor” to mean “any person and his agents, servants, employees, or attorneys engaged in collecting a debt owed or alleged to be owed to him by a debtor and shall also include a buyer of delinquent debt who hires a third party or an attorney to collect such debt.” There is an exception for persons whose only collection-related activities are solely for the purpose of serving legal process.
It is unclear whether the MAG’s new “creditor” definition is intended to reach the conduct of third-party debt collectors who are subject to regulations issued by the Massachusetts Division of Banks (DOB). The DOB regulations apply to a “debt collector,” defined as a person whose principal business is debt collection and “who regularly collects or attempts to collect, directly or indirectly, a debt owed or due or asserted to be owed or due another.”
According to the MAG’s Web site, the MAG debt collection regulations prohibit “many unfair debt collection practices by creditors and regulations of the [DOB] prohibit unfair debt collection practices by debt collection agencies.” Thus, it would appear that the MAG regulations are not intended to directly regulate third-party debt collectors. However, by treating passive debt buyers as “creditors,” the MAG regulations threaten to make passive debt buyers liable for conduct of third-party debt collectors who do not comply with the MAG regulations.
There are a number of other significant changes to the MAG regulations. First mortgage loans or debts greater than $25,000 are now covered by the regulations. Restrictions that previously applied only to “oral” communications now also apply to text messages and other non-oral communications.
There are new limits on the frequency of telephone calls made either in person or through text messaging or a recording. Creditors cannot use contact methods that result in a charge to the debtor or a person residing in the debtor’s household. Creditors must make new disclosures regarding time-barred debts and provide a state validation notice.
In addition to having to comply with various restrictions in the Fair Debt Collection Practices Act, creditors are prohibited from engaging in other conduct such as (1) failing to disclose the creditor’s telephone number and office hours or that of its agents on all written communications to the debtor, and (2) requesting any information about the debtor or the debtor’s assets or accounts other than information the creditor in good faith believes will assist in the collection of the debt.