On March 2, 2012, the Office of the Attorney General issued revised debt collection regulations (“the Regulations”), the purpose of which was to further define unfair or deceptive acts or practices in the collection of debts from persons within the Commonwealth of Massachusetts. The amended Regulations were issued following an extensive comment period and a public hearing on May 18, 2011. The new regulations took effect on March 2, 2012.
Since the Regulations were promulgated, the Office of the Attorney General has received inquiries concerning the scope and implementation of 940 CMR 7.08: Validation of Debts as well as certain other limited areas of concern. In order to provide clarity on the issues raised in connection with compliance with these sections, and to assist in the implementation of the Regulations, the Office of the Attorney General issues this guidance.
“Initiating a Communication” Under 940 CMR 7.04(1)(f)
According to the Regulations, creditors may not initiate a communication with a debtor via telephone more than two times in a seven day period to a debtor’s home, cell, or personal telephone number. The goal of this provision is to not only limit the number of times a creditor can communicate with a debtor via telephone to try to collect a debt, but to also limit the fees that a creditor can impose on a debtor (thereby limiting voicemails and text messages to twice in a seven day period). Accordingly, unsuccessful attempts by a creditor to reach a debtor via telephone may not constitute initiation of communication if the creditor is truly unable to reach the debtor or to leave a message for the debtor. Notwithstanding this interpretation, the Office of the Attorney General may still consider enforcement action against any conduct, including initiation of communication via telephone, the natural consequence of which is to harass, oppress, or abuse a debtor.
Secured Creditors and 940 CMR 7.07(18)(d) and (19)
940 CMR 7.07(18)(d) and (19) do not preclude secured creditors from enforcing their rights against their collateral in accordance with valid enforceable mortgages or other valid enforceable security agreements.
Creditors’ Validation Obligations Under 940 CMR 7.08
Communication in Connection with the Collection of a Debt
940 CMR 7.08(1) imposes particular requirements on creditors to provide certain disclosures to a debtor within five business days after the creditor initially communicates with a debtor about the “collection of a debt.” Certain factors the Attorney General’s Office will consider to determine whether a creditor has made a communication in connection with the collection of a debt include:
- Whether the communication demands payment or otherwise attempts to collect the debt.
- Whether the communication is an attempt to induce the debtor to settle or discuss the debt.
- The relationship of the parties.
Consistent with the articulated rationale for the federal validation provision, 940 CMR 7.08 is intended to assist the debtor when, among other things, a creditor inadvertently contacts the putative debtor at the start of his collection efforts. A single disclosure notice is required following the initial communication in connection with the collection of a debt determined as articulated above. However, a creditor must validate a disputed debt pursuant to 940 CMR 7.08(2) even if he has included proof of the debt within the initial communication.
Validation of Debt and the Automatic Stay Under 940 CMR 7.08(2)
The automatic stay established by section 7.08(2) is in place until a creditor produces the documents necessary to validate a debt. This is not intended to limit the ability of creditors in mortgage transactions to contact delinquent borrowers about home preservation options or other loss mitigation programs that may benefit a borrower/debtor. For purposes of the Regulations, such contacts with a debtor are for servicing purposes in an effort to assist the consumer, and are not considered to be made in connection with collection of the debt.
Documents Required Under 940 CMR 7.08(2)(a)
The Attorney General's Office expects that creditors will act in good faith and exercise due diligence to produce documentation sufficient to confirm that the amount demanded is due to the creditor from the debtor. The provision is in place to assist and protect the debtor who feels the collection efforts may be misplaced and the debt invalid. To that extent, if a creditor has certain documentation in its possession which serves to verify the identity of the consumer and the amount of the debt owed to the creditor, then those must be included in the materials provided to the debtor.