Retail Installment Sales License Requirement - Q2 2000

By the Division of Banks

A company proposes to have its central retail office handle all "back-room" administrative functions related to creating a relationship between its branch offices and a dealer. The company would provide both the branch office and central office phone number on its billing statements and would direct customers to send payments to a central payment processor. Each branch office could also accept and post payments. The major shift in responsibility between the branch offices will be that the central office will exclusively handle all collection activities on the retail installment contracts originated by its branches in individual states. The issue is whether a retail installment sales license would be required for the company's central retail office.

The company conducts it business by having its entire branch offices hold a retail installment sales license in the Commonwealth pursuant to Mass. Gen. Laws chapter 255D. Each of these branches will continue to be licensed in this state after the proposed centralization of servicing activities. The branches will continue to fund the purchase and retain the original retail installment contracts. It is the position of the Division that the central office of the company would not be required to obtain a separate license from its branch offices in order to conduct "back-room" administrative activities on behalf of its branches.

An issue of concern to the Division is whether the company would be required to obtain a collection agency license to perform collection activities for retail installment contracts originated by its branch offices. Mass. Gen. Laws chapter 93, section 24 requires that any person or entity collecting debts on behalf of a third party to obtain a collection agency license from the Division. However, it is the position of the Division that the company would not be engaged in the collection of debts for a third party because it would only be consolidating the collection activity of its own branch accounts. Therefore no collection agency would be required under said chapter 93, section 24. However such collection would be subject to the Commonwealth of Massachusetts Attorney General's debt collection regulation at 940 CMR 7.00 et seq.