Massachusetts Court Rules in Favor of Passive Debt Buyers

SACRAMENTO, Calif. -- The Massachusetts Supreme Judicial Court handed down a ruling earlier this week holding that passive debt buyers are not required to obtain a Massachusetts license when “all aspects of the debt collection process are contracted out to and conducted by” a licensed third-party collection agency.

The decision in Dorrian v. LVNV Funding, LLC reversed a lower court ruling finding that an unlicensed passive debt buyer had violated a Massachusetts consumer protection law under these circumstances. Receivables Management Association International (RMA) filed an amicus brief supporting LVNV’s appeal seeking reversal of the lower court’s decision. In its brief, RMA International noted its long-standing work with the Massachusetts Division of Banks and Attorney General concerning the regulation of debt buyers.

Specifically, RMA highlighted to the regulators on many occasions the uniqueness and challenges associated with the split regulatory authority in Massachusetts law under which the Attorney General’s office regulates passive debt buyers as “creditors” (which do not require a license to collect debt) and the Division of Banks regulation of active debt buyers as “debt collectors” who must be licensed.

RMA’s brief noted that for more than 10 years, the Division of Banks has issued guidance stating passive debt buyers are not required to be licensed and that its guidance was reasonable in light of Massachusetts’ split regulatory authority.  RMA urged the court to reverse the trial court’s decision because it “seeks to punish passive debt buyers for following the long-standing Division guidance and practice, not for any actual wrongdoing,” because all of LVNV’s collection activity had been carried out by a third-party licensed agency and none of the agency’s activities were alleged to be wrongful.

The Massachusetts Supreme Judicial Court agreed finding that the “division’s interpretation helps resolve the ambiguity in the plain language of the statute, drawing a line between debt buyers and collectors based on whether they are involved in any collection activities with consumers.  The division’s interpretation also reflects and respects the core concern of the statute, which is to prevent abusive debt collection practices.”

The Dorrian decision is available here. RMAs amicus brief can be accessed here.

About Receivables Management Association International

Receivables Management Association International (RMA) is the nonprofit trade association that represents more than 500 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to its rigorous uniform industry standards of best practice which focus on the protection of the consumer. RMA provides its members with extensive networking, educational, and business development opportunities in asset classes that span numerous industries. The association continually sets the standard in the receivables management industry through its highly effective grassroots advocacy, conferences, committees, task forces, publications, webinars, and breaking news alerts. Founded in 1997 as the Debt Buyers Association, RMA is headquartered in Sacramento, California.