Massachusetts Debt Collection Regulations, An Explainer: Communications

Last week in Compliance Weekly, we looked at the tension between two competing/conflicting Massachusetts regulations:

• 940 CMR 7.00: Debt Collection Regulations, published by the Attorney General’s office
• 209 CMR 18.00: Conduct of the Business of Debt Collectors and Loan Servicers, published by the Division of Banks and Loan Agencies

Both regulations exist at the same time, and they don’t agree with each other. The best illustration of this was highlighted in the conflicting guidance provided to the industry by the regulators in question:

• The Mass. Attorney General believes that the Attorney General’s Debt Collection Regulations, 940 C.M.R. 7.00 et seq., apply to both creditors and third-party debt collectors.
• The Mass. Division of Banks believes that the Attorney General's Debt Collection Regulations, 940 C.M.R. 7.00 et seq., do not apply to third party debt collectors.

So much for clarity and consistency.

Who is a creditor, and when?

Perhaps the biggest tension between the two documents is that the Attorney General’s office lumps third-party debt collectors and some debt buyers under the umbrella “creditor,” whereas the Division of Banks and Loan Agencies separates the two (I’ve bolded certain passages for emphasis):

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• Attorney General: “Creditor means any person and his or her agents, servants, employees, or attorneys engaged in collecting a debt owed or alleged to be owed to him or her by a debtor and shall also include a buyer of delinquent debt who hires a third party or an attorney to collect such a debt provided, however, that a person shall not be deemed to be engaged in collecting a debt, for the purpose of 940 CMR 7.00, if his or her activities are solely for the purpose of serving legal process on another person in connection with the judicial enforcement of a debt.”
• Division of Banks and Loan Servicers: “Creditor means any person who offers, or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such a debt for another.”

I cannot give you legal advice for a variety of reasons, probably the strongest being that I am not a lawyer no matter how many times I attempt to argue in front of the Supreme Court. But I can offer some suggestions. You should absolutely be in conversation with your own legal counsel about this.

Suggestions

• Familiarize yourself with both sets of rules (linked above).
• When there appears to be conflict between the rules (and I’ll show some examples in a titch), go with the more prohibitive version.

Examples

940 CMR 7.04 Contact with Debtors, sec. (d) v. 209 CMR 18.16 False or Misleading Representations, sec. (16)

An early frustration you may find in familiarizing yourself with the two sets of regulations is that they don’t necessarily overlap cleanly. In this example, we have to look at a section on contact in one, and false or misleading representations in another.

They primarily agree with each other, and require that collectors must identify themselves, either with their given name, or, if an alias, the collector must use the same alias for the duration of their employment with that agency. The main difference: the Division of Banks and Loan Servicers wants a list of employee aliases sent to the Commissioner while the Attorney General has no such requirement.

Suggestion: follow the Division of Banks and Loan Servicers instructions.

940 CMR 7.04 Contact with Debtors, sec. (i) v. 209 CMR 18.14 Communication in Connection with Debt Collection, sec. (1)(e)

Again, both regs primarily agree with each other; if you are going to communicate with a consumer at his or her place of employment, you have to send a “Notice of Important Rights.” The main difference – but it is a difference, and therefore must be accounted for – is in what that Notice of Important Rights looks like.

The Division of Banks and Loan Servicers wants the language to look like this:

NOTICE OF IMPORTANT RIGHTS

You have the right to make a written or oral request that telephone calls regarding your debt not be made to you at your place of employment. Any such oral request will be valid for only ten days unless you provide written confirmation of the request postmarked or delivered within seven days of such request. You may terminate this request by writing to the debt collector.

The Attorney General’s office wants to see the notice in all-caps:

NOTICE OF IMPORTANT RIGHTS

YOU HAVE THE RIGHT TO MAKE A WRITTEN OR ORAL REQUEST THAT TELEPHONE CALLS REGARDING YOUR DEBT NOT BE MADE TO YOU AT YOUR PLACE OF EMPLOYMENT. ANY SUCH ORAL REQUEST WILL BE VALID FOR ONLY TEN DAYS UNLESS YOU PROVIDE WRITTEN CONFIRMATION OF THE REQUEST POSTMARKED OR DELIVERED WITHIN SEVEN DAYS OF SUCH REQUEST. YOU MAY TERMINATE THIS REQUEST BY WRITING TO THE CREDITOR.

The language is almost the same; because the Attorney General classifies debt collectors as creditors, you’ll note that requests in writing are sent to the creditor. The presentation is different.

Suggestion: follow the Attorney General’s formatting, but use “debt collector” rather than “creditor” so as not to confuse the least sophisticated consumer.

940 CMR 7.05 Contact with Persons Residing in the Household of a Debtor, sec. (2) v. 209 CMR 18.14 Communication in Connection with Debt Collection, sec. (4)

This is a significant conflict between the two regulations.

Attorney General: “It shall constitute an unfair or deceptive act or practice for a creditor to imply the fact of a debt, orally or in writing, to persons who reside in the household of a debtor, other than the debtor.”

Division of Banks and Loan Servicers: “For the purpose of 209 CMR 18.14, the term “consumer” includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.”

The Division of Banks and Loan Servicers allows for communication with spouses; the Attorney General’s office does not. In fact, the word “spouse” does not appear in the Attorney General’s regulations at all with regard to communication and debt collection.

Suggestion: the safest suggestion here is to follow the Attorney General’s regulations, as it is the more prohibitive of the two.

Conclusion

Several industry advocates have been working with Massachusetts on these conflicts; however, they’re still in the early stages of this process, and nothing, yet, has been made clear except that both regulations exist, and both are enforceable.

And even the safest suggestions aren’t fool-proof suggestions. The advice suggested has no guarantees attached to it. Until such time as there’s a reconciliation between Massachusetts’s Attorney General’s office and the Division of Banks and Loan Servicers, Massachusetts remains, in technical terms, a mess.