Alert! Debt Buyers and Debt Collectors May Need a License to Buy and Collect Debt in New Jersey

The United States District Court for the District of New Jersey recently denied a motion to dismiss a Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., claim against a debt buyer and a debt collector because the debt buyer failed to obtain a “consumer lender” license pursuant to the New Jersey Consumer Finance Licensing Act (“NJCFLA”).

In Veras v. LVNV Funding, LLC and MRS BPO, LLC, a New Jersey consumer filed a class-action FDCPA complaint against a debt buyer and debt collector alleging a violation of Section 1692e(10) of the FDCPA, which prohibits using a false representation of deceptive means to collect or attempt to collect consumer debt.  The debt collector sent a collection notice on behalf of the debt buyer in an attempt to collect a debt owed by the consumer.  The consumer alleged that the debt buyer and debt collector engaged in deceptive conduct because they attempted to collect consumer debt without obtaining a license under the NJCFLA.

The court determined that the debt buyer was considered a “consumer lender” under the NJCFLA because it “directly or indirectly engages…in the business of buying, discounting or endorsing notes…for compensation in amounts of $50,000 or less…”.  Therefore, the debt buyer was required to obtain a license under the NJCFLA.  Thus, even though the collection letter did not make any representation that the debt collector or debt buyer was licensed under the NJCFLA, the court still found that the allegations supported the FDCPA claim.

This case is interesting because New Jersey does not have a law expressly requiring debt collectors to obtain a license.  Instead, there are only bonding and registration requirements.  Thus, this court determined that the NJCFLA indirectly applies to debt collectors collecting in New Jersey because debt buyers are considered “consumer lenders” and are required to obtain a license in order to engage in collection activity.  

For more information on this case or the FDCPA, contact Stephanie Strickler at 312-334-3465 or