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Opinion Summary of Selected Opinion 99-128

Date: 02/01/2000
Organization: Division of Banks
Docket Number: 99-128

This opinion was issued in the first quarter of 2000.

Table of Contents

License requirement for companies contracting with local collection agency

A company intends to contract with national credit granters and others regarding recovery of their receivables. The creditors would place their receivables with the company who would refer those accounts to local collection agencies across the country, including Massachusetts. The company will contract with local collection agencies in each state that would primarily collect from debtors in the same state. The collection agencies that the Client intends to refer the creditor accounts to in Massachusetts will be licensed collection agencies. The creditor's receivables would be put on the company's proprietary collection software and worked by the collection agency that was assigned the accounts by the Company. The agencies would access the software through the Company's internet web page and each agency would have access only to the accounts the Company has placed with it. Each agency would collect the accounts in its own name. The Company would manage the collection agencies' collection activities.

Additionally, trust accounts will be established at a Massachusetts bank jointly in the collecting agency's name and the Company's name. Payments from Massachusetts's debtors will be deposited by the collection agency which collected the money into that trust account. The funds would be withdrawn by the Company and remitted to the applicable creditor client. The Company intends to advertise in national publications and has an internet web site that could be seen by credit grantors located in the Commonwealth. However, at this time the Company does not intend to solicit clients in Massachusetts.

Massachusetts General Laws chapter 93, section 24 requires a collection agency license for any person who directly or indirectly conducts a collection agency, or engages in the Commonwealth in the business of collecting or receiving payment for others of any account, bill or other indebtedness, or who engages in soliciting the right to collect or receive payment for another of any account, bill or other indebtedness, or who advertises for or solicits in print the right to collect or receive payment for another of any account, bill or indebtedness.

It is the position of the Division that the Company would not be required to obtain a collection agency license in the Commonwealth. This position is based in part on the representation that all collection activity and contacts with debtors in the Commonwealth will be performed by collection agencies which are properly licensed by the Division. However, the Division does have serious concerns regarding the joint trust account arrangement between the Company and the licensed collection agency. The concern is the potential impact that such an arrangement may have on the licensed agency's ability to meet the bonding requirements set forth in G. L. c. 93, section 24. Agencies are required to maintain on file with the state treasurer a good and sufficient bond in amounts and terms further specified in section 25 of said chapter 93. Prior to engaging in the joint trust account arrangement as proposed, a licensed collection agency in the Commonwealth would have to provide the Division with sufficient information and assurances that any such arrangement would not jeopardize the effect of required bond coverage. It is the Division's position that such a joint trust account arrangement, would not be permissible at this time for a licensed collection agency in the Commonwealth.

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