Incidental Contact - License exempt - Does it apply to CRs

[luckyduck]

In Indiana the following exception applies to licensing of collection agencies:

A nonresident collection agency that has only incidental contact with a debtor is not required to be licensed under this chapter. As used in this subsection, "incidental contact" means contact on behalf of nonresident creditors using interstate communications, including telephone, mail service, or facsimile transmissions

Can anyone tell me if this exception allows a non-resident unlicensed collector to report information to a credit bureau? It states that they can only have incidental contact with a debtor and defines incidental contact as contact by telephone, mail service, or facsimile. It seems to me that if a collection agency is reporting accounts on CRs then that agency would be required to have a license. Can someone show me how I am wrong?

[kjosephmorris]

On its face I would say the following...

It appears that you have mixed your legal apples and oranges.

The State laws spell out who may go about collecting money from its residents and how they may go about it.

The Federal laws spell out who may go about reporting to the CRAs and how they may go about.

In a practical sense the exception you are looking at is Indiana saying that it is safe for you to answer the door as the CA is not allowed to cross the state line and come knocking.

You asked: "if this exception allows a non-resident unlicensed collector to report information to a credit bureau?"

This exception is a State issue and cannot override the federal laws of the FCRA, FDCPA or the like.

*** As always: get a second opinion ***

[luckyduck]

ah, but FDCPA and FCRA state in general terms that if a state law offers more protection to the consumer, then the state law overrides the federal law.

Indiana law in essence states that "A nonresident collection agency that has only incidental contact with a debtor is not required to be licensed under this chapter".

It does not state that "A nonresident collection agency that has only incidental contact with a debtor and reports debts to national collection agencies is not required to be licensed under this chapter"

To be exempt from licensure, the statute on it's face and in plain terms states that the only collection activity permitted is incidental contact.

The statute is pretty unambiguous, and does offer more protection than the federal statutes. So, truly mixing legal apples and oranges, places this state statute above the federal statutes.

Now, I could see it in a different light, such as the statute only approaches the contact with the debtor, and protects the debtor from a nonresident CA either physically being present in Indiana, or filing a lawsuit in Indiana, and has nothing to do with any other collection activity. But I do think the statute is pretty clear on it's face.

A nonresident collection agency that only has incidental contact with the debtor

To me that says all they can do is send dunning letters and call you on the phone. No CRAs, no lawsuits. I'm open to any precedence or good argument that contradicts this. The Fed/State was a good argument with the exception that federal laws give state laws ruling authority when they "offer more protection to the consumer".

[kjosephmorris]

I'm rooting for your instincts to be right on this. Also, I am in Indiana and would love to add this to the ammunition pile to be used against the non-licensed out-of-state CAs.

I just don't see it yet...

If the CA has not contacted you by any means other than interstate communications then where is the violation of the exception?

[luckyduck]

Actually I got to thinking about it, and the statute probably does not apply at all to credit reporting even though credit reporting is absolutely a collection activity.

I think what I was missing is that the license is required to perform collection activities in the State of Indiana, not against residents of Indiana. Reporting to a CB is not an activity in the state of Indiana, but merely an activity against a resident of Indiana.

Hey, sometimes it takes thinking out loud to figure something out. At least if anyone else has that question, it will have been approached.

[Guest]

Having lived in Indiana my entire life until November.. I am VERY familiar with that law and yes you are corect.

You can call, report to Bureaus, and send letters but you cannot sue nor can you bring legal action.

There are quite a few collection agencies who try to get around this by getting a lawyer licensed in the state of Indiana to sue on behalf of them for those debts.

That is ILLEGAL and you need to make sure you call them on it.

Good luck

[flacorps]

My take would be that reporting to CRAs would not be considered "contact" at all (and the statute seems only concerned about contact as a trigger for the licensure requirement ... with "nonincidental contact" being that sort of contact that uses other than interstate means of communication ... meaning in-person). The legislature evidently considered that attempting to regulate interstate means of communication in this realm might violate the commerce clause of the Constitution. Also, they probably considered that non-interstate communication (in person) would have the most potential for abusive behavior, also it would require the CA to have a representative set foot in the state, where the state would darn sure have jurisdiction.

But in any case, if a TL on a CRA report were to be considered contact, I would think that the contact would be considered to have used interestate means.

In short, the statute is narrowly drafted to hit only a particular type of contact not federally-precluded from state regulation and done by a party that the state has unquestionable jurisdiction over; avoiding spilling over into other areas where constitutionality would be questionable.

[retmar]

Like you, everyone would like to see this as being true, but, unfortunately, it isn't. Unless, of course, you can find case law in your state that says different.

The FCRA is different from the FDCPA, and I think that is where the confusion lies. The reporting of negative information is the right of the reporting party to inform others of their relationship with you. This is how potential creditors determine whether to open an account or deny an account. For one of several reasons, this is one tool used by CA's as a way to hopefully cause a consumer to pay the debt if they have any dreams of owning a home, buying a new car, or receiving the lowest possible interest rate on anything. True, some states, such as California, have laws that apply to reporting, but, most of them follow the Federal. An example is in California, it follows Federal, except that the reporting party must notify the consumer, in writing, within 30 days before or after the negative information is reported.