A Tennessee law passed and effective on May 22, 2014 changes the existing licensing requirements for mortgage servicers seeking to obtain the Tennessee Collection Service License.  Under the new law, the definition of “collection service” has been changed, removing the licensing requirement for "any person that engages in, or attempts to engage in, the collection of notes or guarantees.”   Tenn. Code Ann. § 62-20-102(3).  

Additionally, new exemptions have been added to Section 62-20-103(a), including:

  • Any person that services or collects obligations secured by a consensual lien on a dwelling as defined by the Truth in Lending Act or any successor regulation; or
  • Any person that holds or acquires accounts, bills or other forms of indebtedness through purchase, assignment, or otherwise; and only engages in collection activity through the use of a licensed collection agency or an attorney authorized to practice law in this state.   

In recent discussions with the Collection Services Board, a representative of the Collection Services Board noted that the full import of the statute would not be fully understood until mortgage servicers chose to act on it by withdrawing or failing to renew their licenses.  The representative also noted that, even if the statute specifically exempts mortgage servicers from licensure, there was still value in holding the Collection Service License, including as a defense against foreclosure-related counter claims raised by borrowers in default.