Massachusetts AG Coakley Files Amended Debt Collection Regulations

BOSTON – Today, Attorney General Martha Coakley’s Office unveiled strong consumer amendments to its Debt Collection Regulations that will modernize existing regulations to include how companies may contact consumers by cell phone and through text messages.   The regulations, which are expected to become effective later this year after a public hearing, will also regulate the way a “passive” debt buyer, or the company or person who does not originally own the debt, may conduct themselves. The Debt Collection Regulations were implemented in the 1970’s and had not been amended to keep pace with changing technology.

The proposed amendments expand the scope of the current regulations to, among other things, cover debt collection activities involving cell phone and text messaging; ensure that both active and passive debt buyers are subject to debt collection laws; prohibit creditors from attempting to collect a debt that is time-barred unless they make certain required disclosures to consumers with respect to such debts being collected.

“The amendments are designed to ensure that consumers are treated fairly when contacted by creditors to collect a debt and also to create a level playing field, so that those creditors who refrain from using abusive debt collection practices are not at a competitive disadvantage,” AG Coakley said.  “We have now revised these regulations to keep up with changes in technology, including cell phones and text messages. We have also updated the regulations to close the loophole in the law regarding passive debt buyers so that they must play by the same rules as everyone else.”

The proposed amendments to the current regulations were filed today with the Secretary of State’s Office. The Attorney General’s Office expects to hold a public hearing on the regulations later this summer.

The amendments will make several changes to the current regulations, including:

• An amended definition of “creditor” that now includes debt buyers, both active and passive, whether they collect a debt for themselves or hire a third party or attorney to collect it for them.

• An amended definition of “debt” that (i) deletes the exclusion of a loan secured by a first mortgage on real property or in an amount in excess of $25,000 and (ii) makes clear that whether or not the obligation has been reduced to judgment does not matter for purposes of the definition.

• An amended definition of “communication” so that abusive communications by recordings and text messages, etc. are also prohibited.

• Sections 7.04 (Contact with Debtors) and 7.05 (Contact with Persons Residing in the Household of a Debtor) were updated and clarified largely to reflect technological advances such as cell phones and text messaging and other data usage fees.

• Section 7.07 (General Unfair or Deceptive Acts or Practices) incorporated many prohibited practices from the Division of Banks regulation of debt collectors in order to ensure a consistent regulatory approach at the state and federal levels.

• In response to a recent change in the law, a new provision that would make it an unfair act to take possession of or sell upon execution property that is exempt from seizure because its value does not exceed the value for exemption set forth by statute.

• A provision requiring that any person collecting a debt must determine, in good faith, whether the debt is time-barred; and make a specific disclosure to consumers with respect to any debt it knows or has reason to know is time-barred.

The amendments to the debt collection regulations are part of Attorney General Coakley’s initiative to review and streamline regulations issued pursuant to the Consumer Protection Act.  The goal of this initiative is to promote a more favorable regulatory environment that improves the business climate in the Commonwealth while maintaining and promoting principles of consumer protection and fair business practices.

Copies of the revised regulations are available on the Attorney General’s website at www.mass.gov/ago/regulations.