Unlicensed Collection Agency - is it legal?

[isa430]

Is it legal for an unlicensed collection agency to buy and attempt to collect on a debt? If not - can they legally use an attorney to do this, by means of a lawsuit?

[nascar]

Lots of scenarios can come into play which affect the answer. It depends on the specifics of your situation.

[justincase]

if they are not licensed to collect in your state and are reporting on your CR yes you have them on violations. Send them ITS letter advising them of same if they don't remove listing and cease all collection acticvity. However that doesn't stop them from selling the debt to another CA that is licensed in you state.

[chilton1]

A CA does not have to be licensed in your state to report you to the CRAs.

[divemedic]

Depends on the state and the specifics. Reporting IS collection activity.

[justincase]

Reporting an alleged debt by a debt collector to a consumer reporting agency is a “communication” in connection with the collection of a debt and gives rise to a violation of 15 U.S.C. 1692e[, of the FDCPA. Sullivan v. Equifax, 2002 WestLaw 799856 [u.S.D.C. E.D. Pa. 2002] This constitues collection activity. Just settled case against Collection Bureau Of Orlando for same exact thing.

[nascar]

if they are not licensed to collect in your state and are reporting on your CR yes you have them on violations.

In terms of FDCPA violations, the only violation we would be talking about is threatening to take action which cannot legally be taken." Unless the unlicensed collector is threatening to take some kind of action, most courts have held that a letter from a debt collector simply requesting payment is not a per se violation of the FDCPA. Ferguson v. Credit Management Control, Inc., 140 F.Supp.2d 1293 (M.D.Fla., 2001), although not in the 6th District, gives provides a good discussion on the question. The one quote you'll want to take away from reading this opinion is "Action that could not be legally taken...Courts are not in harmony on the issue of whether a violation of state law for failure to meet state licensing or registration requirements meets this statutory definition under the FDCPA." Happy reading.

[isa430]

Thanks for that.

The situation at hand is not a threat of taking legal action or an issue of reporting to CRAs.

It's the CA actually doing it. ie summons issued, court date now set.

[admin]

Some states require licensing, others not.

[isa430]

Okeydoke. Thanks again.

[justincase]

File a motion to have complaint dismissed and file counter claim for the State violations. My situation was the same I pressed the State charges and thats what worked for me. Check your States Laws

Here is what Maryland says:

MD Code, Business Regulation, § 7-401

Title 7. Collection Agencies (Refs & Annos)

Subtitle 4. Prohibited Acts; Penalties

§ 7-401. Prohibited acts

(a) Except as otherwise provided in this title, a person may not knowingly and willfully do business as a collection agency in the State unless the person has a license.

( A person who violates this section is guilty of a misdemeanor, and on conviction, is subject to a fine not exceeding $1,000 or imprisonment not exceeding 6 months or both.

CREDIT(S)

Acts 1992, c. 4, § 2.

PRIOR COMPILATIONS

Formerly Art. 56, § 329B.

LEGISLATIVE NOTES

Revisor's Note (Acts 1992, c. 4):

This section is new language derived without substantive change from former Art. 56, § 329B.

In subsection (a) of this section, the former prohibition against use "after revocation or during suspension" is deleted as unnecessary. The former prohibition apparently was intended to serve 2 purposes: first, to prohibit an attempt to do business as a collection agency by use of an invalid license; and second, to prohibit misrepresentation by use of an invalid license. These specific prohibitions are fully encompassed in the general prohibitions under this section.

The Business Regulation Article Review Committee notes, for consideration by the General Assembly, that most licensure schemes do not require the element of scienter.

As to the referenced exceptions, see §§ 7-102 and 7-301 of this title.

Defined terms: "Collection agency" § 7-101

"License" § 7-101

"Person" § 1-101

MD Code, Business Regulation, § 7-401, MD BUS REG § 7-401

Current through all Chapters of the 2007 Regular Session effective

through June 1, 2007.

© Thomson/West 2007

END OF DOCUMENT.

[divemedic]

In terms of FDCPA violations, the only violation we would be talking about is threatening to take action which cannot legally be taken." Unless the unlicensed collector is threatening to take some kind of action, most courts have held that a letter from a debt collector simply requesting payment is not a per se violation of the FDCPA.

Actually, the FDCPA is violated when a CA attempts to collect when not licensed. Congress established a core of liability that prohibits debt collectors from engaging in any harassing, oppressive, or abusive conduct; making any false, deceptive, or misleading representation; and using “unfair or unconscionable means” to collect any debt.

In subsections following the general prohibitions, “each of these provisions includes a non-exhaustive list of examples of proscribed conduct.” Fox v. Citicorp Credit Servs., 15 F.3d 1507, 1516 (9th Cir. 1994).

It is my opinion that any action taken by a CA in violation of any state law is an unfair or unconscionable action.