Servicing Companies Collecting Debt For Others Require A Collection Agency License - Q2 2000

A car manufacturer makes available several insurance and extended warranty contracts to customers for its vehicles. The contracts are serviced for the manufacturer by a servicing company. The servicing company acts on behalf of the manufacturer as a billing service. All contacts with customers are done through the mail by the servicing company. The responsibilities of the company include; billing customers, receiving customer payments, maintaining payment records, sending customer late notices and other correspondence and coordinating the servicing of contract payments with dealers.

Mass. Gen. Laws chapter 93, section 24 requires that a person or entity engaged in the Commonwealth in the business of collecting or receiving debt for others of any account, bill or other indebtedness, or engaged in soliciting the right to collect or receive payment for another of any such indebtedness shall obtain a license as a collection agency from the Division. The Division's regulation at 209 CMR 18.03 defines a "debt" to be "money or its equivalent which is, or alleged to be more than 30 days past due and owing, unless a different period is agreed to by the debtor, under a single account as a result of a purchase, lease, or loan of goods, services, or real or personal property."

If there is any period of time that the servicing company is collecting payment that is more than 30 days past due on behalf of the original creditor, then the servicing company must be licensed as a collection agency.