Changes to the Massachusetts debt collection regulations recently proposed by the state’s Attorney General would expand their coverage to reach passive debt buyers who have no direct contact with consumers and require new disclosures for time-barred debts.
A hearing on the proposal is scheduled for May 18, 2011, and comments are due by June 20, 2011.
The proposal represents yet another example of increasing pressure on debt buyer practices. It would amend the definition of “creditor” to include “a buyer of delinquent debt who either seeks to collect such debt directly or hires a third party or an attorney to collect such debt.” In the Notice of Hearing issued with the proposal, the Attorney General states that the change is intended to “ensure that both active and passive debt buyers are subject to debt collection laws.” (Click here to read an earlier legal alert on judicial and legislative developments targeting debt buyers.)
Thus, the proposed rule would appear to threaten to make passive debt buyers liable for misconduct of the parties who collect their debts, regardless of the relationship between the debt buyer and the collector. This strikes us as a dangerous expansion of normal rules of liability.
If enacted, the proposal would make Massachusetts yet another state to impose new disclosure requirements in connection with attempts to collect time-barred consumer debts. It would require a “creditor” collecting or attempting to collect a debt that it knows or has reason to know is time-barred to disclose certain information, including that the debt “may be unenforceable through a lawsuit because the time for filing suit has or may have expired.” The regulation would mandate how and where the disclosure must appear in written communications and when it must be made in oral communications. (Click here to read an earlier legal alert on New Mexico’s new time-barred debt requirements.)
Other proposed changes include (1) removing the exception from the definition of “debt” for first mortgage loans and debts greater than $25,000 (2) making certain prohibitions applicable to cellular telephone calls and text messaging and (3) expanding the conduct prohibited by the regulations to include various acts and practices prohibited by the federal Fair Debt Collection Practices Act (FDCPA) and/or the regulations of the Massachusetts Bank Commissioner applicable to third-party debt collectors.