Massachusetts Collection Law Firms Are Now ‘Debt Collectors’

Eric Rosenkoetter

In an Opinion Letter letter dated Nov. 2, the Massachusetts Division of Banks declared that collection law firms in Massachusetts are required to obtain a debt collector license pursuant to Mass. Gen. Laws Ch. 92, § 24 et. seq.

The Opinion Letter was in response to correspondence from a Massachusetts collection law firm inquiring whether the firm, self-described as “overwhelmingly concentrated in the area of consumer debt collection on behalf of its clients,” was required to be licensed.  At issue was the applicability of the licensing exclusion for “attorneys-at-law collecting a debt on behalf of a client.”  In its Opinion, the Division clarified that the determination “turns on the extent of the debt collection activity conducted by the firm.”

The Division reasoned that the Massachusetts definition of “debt collector” includes any person “who regularly collects or attempts to collect, directly or indirectly, a debt owed or due or asserted to be owed or due another.”  Drawing upon the definition of “regular” from Black’s Law Dictionary, the Division explained that the limited “ ‘attorney-at-law’ exclusion applies to ‘attorneys collecting a debt on behalf of a client’ rather than attorneys who regularly collect debts on behalf of a client.” (emphasis in original)

Thus, based on the law firm’s description of the nature of its practice, the Division concluded that the law firm’s “principal purpose is the collection of debts and therefore its activities are beyond the scope of the attorney-at-law exemption.”

In a footnote, the Division gives Massachusetts collection law firms six months to comply, noting “the debt collector licensing requirement for law firms composed of Massachusetts licensed attorneys, as set forth in this Opinion, is a new requirement that will not be imposed retroactively on affected law firms. Furthermore, the Division recognizes that immediate compliance by affected law firms is not feasible.”

Many state debt collection statutes exempt attorneys from the licensing requirements, so it will be important to stay abreast of this issue in the event other policymakers consider adopting a similar position.

This article is re-published with permission from Eric Rosenkoetter and Maurice Wutscher.