Massachusetts Updates Collection Regulations to Affect Asset Buyers

The Massachusetts Division of Banks recently updated its debt collection regulations 209 CMR 18:00: Conduct of the Business Debt Collectors and Loan Servicers.  Some of the major changes include the addition of asset buyers to the definition of debt collector, clarifications regarding the requirements for collectors which are exempt from licensure, prohibitions regarding text messages, and new communication requirements.  These changes became effective on October 11, 2013.  Below are highlights to the amendments by section: 18.01: Purpose and Applicability

Persons exempt from registration provisions and licensing under M.G.L. c. 93, § 24A(c) that conduct business of a third party loan servicer or a debt collector shall not be subject to the provisions of 209 CMR 18.03 through 209 CMR 18.12 and shall be subject to the provisions of 209 CMR 18.13 through 18.21A.

18.02: Definitions

Asset buyers were brought under the definition of “Debt Collector” which now includes: any person who buys or acquires debt that is in default at the time of purchase or acquisition and who seeks to collect such debt directly.  Also, the provision that exempts attorneys from the definition of debt collector was amended to the following: Debt collector shall not include attorneys-at-law licensed to practice law in the Commonwealth who are collecting a debt on behalf of a client.

18.03: Application Procedures

In subsection 18.03(2)(a) on Financial Responsibility, the Commissioner was given more flexibility in determining if an applicant has met the net worth requirements.  The timeframe to submit financial statements required under subsection (b)3 has been shortened to 90 days after the close of a renewal applicant’s fiscal year, from the previous allowed 120 days.

18.04: Licensing Standards

In this section, the amended criteria for which the Commissioner may deny an application now includes: (2)(f) in its audited or reviewed financial statements, a notation made by an independent certified public accountant referencing existing conditions that raise doubt about the Applicant’s ability to continue as a going concern.

18.06: Registration Standards

The amended criteria under which the Commissioner may deny an application includes: the applicant has not satisfied the requirements of M.G.L.  c. 93, §§ 24-24G or 209 CMR 18.05 or has violated any provision of M.G.L. c. 93, §§ 24- 28 and 209 CMR 18.00.

18.08: Notice of Significant Events and Proposed Change in Ownership or Personnel

The definition of crimes that must be reported to the Commissioner within one day was amended.  Additionally, a new requirement was added to report within one day any closing or shortage of trust account.

18.13: Acquisition of Location Information

A new subsection (6) was added and states that any debt collector communicating with any person other than consumer shall not cause expense to any such person in the form of long distance telephone calls, text messaging, download fees, data usage fees, or other similar charges.

18.14: Communication in Connection with Debt Collection

This section amends provisions that prohibit a debt collector to communicate with a consumer in connection with the collection of any debt without prior consent by the consumer or a competent jurisdiction to include communication via text messaging (subsection (d)).

In subsection (e) “all caps” requirement has been removed from the Notice of Important Rights.  The notice may now be in standard case.

18.16: Unfair Practices

In this section that describes what conduct is considered to be unfair practices, subsection (14) was added that reads: Causing expense to any consumer in the form of collect telephone calls, text messaging, download fees, data usage fees, or similar charges, without the express permission of the consumer to communicate in that manner.  However, a debt collector may place non-collect telephone calls to the consumer’s cellular telephone, or other telephone number provided by the consumer as his/her personal telephone number.

In subsection (6) that prohibits taking or threatening to take any nonjudicial action to effect dispossession or disablement of property, several conditions were added:

(c) the property is exempt by law from such dispossession or disablement;

(d) the debt collector knows or has reason to know that demands for payment and/or legal notices were not directed to the consumer’s last known address.

18.18: Validation of Debts

This section, which contains the required information to be provided to a consumer or any attorney for a consumer within five business days, now includes electronic records.

18.21: Unfair Servicing Practices- General

New provisions (i)-(m) that describe what constitute to be unfair or unconscionable means in servicing any loan were added to this section.

18.21A: Mortgage Loan Servicing Practices

The amended section now outlines the documentation and information required to be provided by third party loan servicers in the context of foreclosure proceedings.

To view the new regulations, please go to the Massachusetts Division of Banks website.  “Redlined” version of the requirements can be found here: