By the Division of Banks

October 3, 2006

TO: Licensed Debt Collectors including Debt Buyers, UNFAIR DEBT COLLECTION PRACTICES.

Over the past few months the Division has become aware of various unfair practices occurring within the debt collection industry and is issuing this Industry Letter to advise licensed debt collectors, including debt buyers, of potential violations of Massachusetts debt collection laws subject to strict enforcement through the Division's examination and complaint processing systems.

The Division licenses and examines entities engaged in the business of debt collecting in the Commonwealth. It is the Division's position that entities purchasing debts in default at the time of purchase, commonly referred to as "debt buyers", must also be licensed as debt collectors. This position is set forth in an Industry Letter dated June 16, 2006 (the "June Letter"). Therefore, debt buyers as referred to in the June Letter are subject to the Commonwealth's debt collection laws, General Laws chapter 93, sections 24-28, inclusive and the Division's regulations, 209 CMR 18.00 et seq (collectively the "Debt Collection Law").

It is a violation of both state and federal debt collection laws for a debt collector to use any false, deceptive, or misleading representations or means in connection with the collection of any debt or to use unfair or unconscionable means to collect any debt or to harass, oppress or abuse any person in connection with the collection of a debt. These laws are intended to provide broad protection for consumers from unfair practices of debt collectors.

The following represent examples of conduct which, if engaged in by a debt collector, would give rise to investigation and enforcement action by the Division as violations of the Debt Collection Law as false, misleading, deceptive, unfair, unconscionable, or constitute harassment within the meaning of the Debt Collection Law:

• To continue to contact a consumer debtor after being provided with information which reasonably calls into question that the debt is valid and outstanding or the consumer contacted is properly identified as the debtor responsible for the debt. This practice is considered harassment or abuse in violation of 209 CMR 18.15 and also a violation of 209 CMR 18.16 governing false or misleading practices including but not limited to 209 CMR 18.16(2) and (10).

• To infer in any way that a consumer debtor does not need to attend a scheduled court date. This practice is considered a false or misleading representation in violation of 209 CMR 18.16, including but not limited to sections 18.16(2), (3), (10), and (15). This practice is also considered an unfair practice in violation of 209 CMR 18.17, including 209 CMR 18.17(12).

• To use or employ a constable or sheriff or any other officer authorized to serve legal papers, in the collection of a debt. This practice is considered a false or misleading representation in violation of 209 CMR 18.16, including but not limited to sections 18.16(1), (9), and (13).

• To take any nonjudicial action to seize property without compliance with all statutory requirements. This practice is considered an unfair practice in violation of 209 CMR 18.17(6).

• To take any action to initiate or imply that legal action will be taken to collect a debt when it is known the debt is unrecoverable given the lapse of the applicable statute of limitations. This practice is considered a false or misleading representation in violation of 209 CMR 18.16, including but not limited to 209 CMR 18.16(2).

The Division, through its examination force, as well as its investigation of consumer complaints, will take action against any debt collector, including debt buyers, upon a finding or upon obtaining any evidence of conduct on the part of a debt collector to harass, oppress, or abuse any person in connection with the collection of a debt; to make any false or misleading representation or to engage in unfair or unconscionable means to collect any debt, including but not limited to the above enumerated conduct.

Moreover, the identification of such abusive practices may necessitate the Division's implementation of other measures to address these areas.

Should you have any questions with regard to this letter, please contact Bonita M. Irving, Senior Deputy Commissioner for Compliance and Community Affairs at (617) 956-1561.

Very truly yours,

Steven L. Antonakes
Commissioner of Banks