Maryland Clarifies Licensing Requirements for Debt Purchasers

Debt purchasers who conduct any consumer debt collection activity in Maryland, including litigation, are required to be licensed as a collection agency, according to ACA International.

On May 5, 2010, the Maryland State Collection Agency Licensing Board released an advisory notice that clarified licensing requirements for debt purchasers who collect debt through civil litigation.

The recent advisory notice acknowledges a letter provided by the Board in June 2007 may have created possible confusion over licensing requirements for debt purchasers who collect only through civil litigation. The recent notice clarifies a debt purchaser who collects a consumer claim through civil litigation is a collection agency under Maryland law and required to be licensed as such, regardless of whether an attorney representing the debt purchaser in litigation is a licensed collection agency.

The advisory notice states, however, no action will be brought against a debt purchaser solely for not being licensed when filing suit on a purchased defaulted consumer claim, provided the debt purchaser applies for a license on or before Aug. 31, 2010.

Notably, the advisory notice and applicable regulations do not require all debt purchasers to obtain a license. It still appears debt purchasers who do not actively engage in collection activity or engage in civil litigation are not required to obtain a collection agency license. Debt purchasers may wish to confer with the Maryland Collection Agency Licensing Board or qualified counsel to ensure all business practices of the debt purchaser do not trigger Maryland’s licensing requirements.