New Colorado Collection Agency Requirements Misguided, Say ARM Leaders

The state of Colorado is instituting rules at the end of the month that would require firms collecting in the state to have an office in Colorado, or to contract with a third-party company with an office in the state.

The law, passed in early May by the state legislature with rules slated to go into force July 30, also requires debt collection agencies to have a full-time employee in the state — which can be shared with one or more other firms – and to maintain free and easy access to office records. ARM firms must also accept payments in their physical offices for accounts on which they are collecting.

“They’re ridiculous,” Robert Markoff, past president of the National Association of Retail Collection Attorneys (NARCA), says of the new rules. “They’re going to create more problems than they are trying to solve. This is another example of [lawmakers] going overboard where no real problem existed.”

Markoff expects the new rules to lead to increased sharing of employees, which could lead to security issues.

“Creditors have to have top level security of information in their database, but [security] would be compromised with a shared employee,” Markoff explains. The “free and easy access” provision could bring up some other security issues.

“This type of regulation encourages consolidation of the industry [through the shared employees] and fragmentation of the industry by requiring a presence in Colorado,” Markoff added.

With the movement to online payments, the requirement of an in-state presence makes little sense, Markoff adds. Colorado is an expansive state. It doesn’t help the debtor if the collection firm has a site at one end of the state, or in the mountains, and the debtor is located at the other end of the state.

Linda Russell, past president of ACA International and president of Rawlins, Wyo.-based debt collection agency CollectionCenter, Inc., which also has offices in Colorado, added that the rules came up after a debtor complained about not being able to find a staffed Colorado office of a collection firm that had recently moved most of its operations out of the state. But, like Markoff, she pointed to the problem with a debtor located several hundred miles away from the office, even though they both could still be in Colorado. So the new rules aren’t necessarily any more convenient for the consumer.

Russell added that attorney firms and several other groups had opposed the new rules, but the Colorado Department of Regulatory Authority had sided with firms providing “resident manager” services, which could provide the “shared employee”-staffed offices.

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