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  • Acts
  • 2003
  • Chapter 130 AN ACT RELATIVE TO DEBT COLLECTION AND LOAN SERVICING AGENCIES.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:


Chapter 93 of the General Laws is hereby amended by striking out sections 24 to 25, inclusive, as appearing in the 2002 Official Edition, and inserting in place thereof the following 13 sections:-

Section 24. As used in sections 24 to 28, inclusive the following words shall have the following meanings, unless the context requires otherwise:-

"Commissioner", the commissioner of banks.

"Consumer", any natural person obligated or allegedly obligated to pay any debt.

"Creditor", any person who offers or extends credit creating a debt or to whom a debt is owed, but the term shall not include a person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of the debt for another.

"Debt", any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not the obligation has been reduced to judgment.

"Debt collector", any person who uses an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of a debt, or who regularly collects or attempts to collect, directly or indirectly, a debt owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (f), debt collector shall include a creditor who, in the process of collecting his own debt, uses any name other than his own which would indicate that a third person is collecting or attempting to collect the debt. Debt collector shall also include a person who uses an instrumentality of interstate commerce or the mails in a business the principal purpose of which is the enforcement of security interests. Debt collector shall not include:-

(a) an officer or employee of a creditor while, in the name of the creditor, collecting debts for the creditor;

(b) a person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for a person to whom it is so related or affiliated and if the principal business of the person is not the collection of a debt;

(c) an officer or employee of the United States or a state of the United States to the extent that collecting or attempting to collect a debt is in the performance of his official duty;

(d) a person while serving or attempting to serve legal process on another person in connection with the judicial enforcement of a debt;

(e) a nonprofit organization which, at the request of a consumer, performs bona fide consumer credit counseling and assists the consumer in the liquidation of debts by receiving payments from the consumer and distributing the amounts to creditors;

(f) a person collecting or attempting to collect a debt owed or due or asserted to be owed or due another to the extent the activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by the person; (iii) concerns a debt which was not in default at the time it was obtained by the person; or (iv) concerns a debt obtained by the person as a secured party in a commercial credit transaction involving the creditor;

(g) attorneys-at-law collecting a debt on behalf of a client; and

(h) an agent or independent contractor employed for the purpose of collecting a charge or bill owed by a tenant to a landlord or owed by a customer to a corporation subject to the supervision of the department of telecommunications and energy or the division of insurance insofar as the person collects charges or bills only for the landlord or supervised corporations.

"Register", filing a notice with the commissioner on a form prescribed by the commissioner that notifies the commissioner of the intent to engage in the activities of a third party loan servicer in this state and the payment of a fee required under this act, along with the other documents, proofs, and fees required by the commissioner.

"Servicing", receiving a scheduled periodic payment from a borrower pursuant to the terms of a loan, including amounts for escrow accounts, and making the payments to the owner of the loan or other third party of principal and interest and other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the servicing loan document or servicing contract. In the case of a home equity conversion mortgage or reverse mortgage as referenced in this section, servicing includes making payments to the borrower.

"Third party loan servicer", a person who uses an instrumentality of interstate commerce or the mails in any business the principal purpose of servicing a loan directly or indirectly, owed or due or asserted to be owed or due another.

Section 24A. (a) No person shall directly or indirectly engage in the commonwealth in the business of a debt collector, or engage in the commonwealth in soliciting the right to collect or receive payment for another of an account, bill or other indebtedness, or advertise for or solicit in print the right to collect or receive payment for another of an account, bill or other indebtedness, without first obtaining from the commissioner a license to carry on the business, nor unless the person or the person for whom he or it may be acting as agent has on file with the state treasurer a good and sufficient bond.

(b) A person shall not directly or indirectly engage in the commonwealth in the business of a third party loan servicer without registering with the commissioner. A registrant shall not be required to comply with sections 24F to 27, inclusive.

(c) This section shall not apply to a bank as defined in section 1 of chapter 167, a national banking association, federal savings bank, federal savings and loan association, federal credit union, or any bank, trust company, savings bank, savings and loan association or credit union organized under the laws of any other state of the United States, or any subsidiary of the above; but except as provided herein, this section shall apply to a subsidiary or affiliate, as defined by the commissioner, of an exempted entity and of a bank holding company established in accordance with state or federal law. The commissioner may adopt, amend or repeal rules and regulations, to aid in the administration and enforcement of this chapter.

(d) The commissioner may from time to time establish regulations pertaining to the conduct of the business of a debt collector or a third party loan servicer as he considers necessary.

Section 24B. (a) The application for the license shall be in writing, shall contain information as the commissioner may determine and shall be accompanied by an investigation fee to be determined annually by the commissioner of administration under section 3B of chapter 7. The commissioner may reject an application for a license or an application for the renewal of a license if he is not satisfied that the financial responsibility, character, reputation, integrity and general fitness of the applicant and of the owners, partners or members thereof, if the applicant be a partnership or association, and of the officers and directors, if the applicant be a corporation, are such as to command the confidence of the public and to warrant the belief that the business for which the application for a license is filed will be operated lawfully, honestly and fairly. The application shall also include a description of the activities of the applicant, in such detail and for such periods, as the commissioner may require, as well as further information as the commissioner may require. If the licensee desires to carry on business in more than one place, he shall procure a license for each place where the business is to be conducted.

(b) The license shall be for a period of 1 year as of a date determined by the commissioner. Each license shall plainly state the name of the licensee and the city or town with the name of the street and number, if any, of the place where the business is to be carried on; but, the business shall at all times be conducted in the name of the licensee as it appears on the license. The fee for the license shall be determined annually by the commissioner of administration under section 3B of chapter 7. The license shall not be transferable nor assignable. A change of location of an office of a licensee shall require the prior approval of the commissioner. A request for relocation shall be in writing setting forth the reason for the request, and shall be accompanied by a relocation investigation fee to be determined annually by the commissioner of administration under the provisions of said section 3B of said chapter 7.

Section 24C. (a) The registration of a third party loan servicer shall be in writing, shall contain information as the commissioner may determine and shall be accompanied by an investigation fee to be determined annually by the commissioner of administration under section 3B of chapter 7.

(b) The registration shall be for a period of 1 year as of a date determined by the commissioner. Each registration shall plainly state the name of the registrant and the city or town with the name of the street and number, if any, of the place where the business is to be carried on; but, the business shall at all times be conducted in the name of the registrant as it appears on the registration. The fee for the registration shall be determined annually by the commissioner of administration under section 3B of chapter 7. The registration shall not be transferable nor assignable. A change of location of an office of a registrant requires notification in writing to the commissioner.

(c) A registration accepted by the commissioner under this section does not approve the use of, or indemnify the registrant against claims for, the improper use of the business name stated in the registration. The registration shall also include a description of the activities of the applicant, in such detail and for such periods, as the commissioner may require, as well as further information as the commissioner may require.

Section 24D. (a) The commissioner may investigate the collection records of a licensee or registrant, and for that purpose the commissioner shall have free access to the books and papers of a licensee or registrant relating thereto. A licensee or registrant shall keep and use the business records in such form and at such location as the commissioner, by regulation, shall determine, which shall enable the commissioner to determine whether the licensee or registrant is complying with this chapter and rules or regulations promulgated hereunder by the commissioner and any other law, rule or regulation applicable to the conduct of the business for which it is licensed or registered under this chapter.

(b) The commissioner shall preserve a full record of each examination of a licensee including a statement of its condition. All records of investigations and reports of examinations by the commissioner, including workpapers, information derived from the reports or responses to the reports, and any copies thereof in the possession of a licensee under the supervision of the commissioner, shall be confidential and privileged communications, shall not be subject to subpoena and shall not be made public. For the purposes of this subsection, records of investigation and reports of examinations shall include records of investigation and reports of examinations conducted by a financial regulatory agency of the federal government and any other state, and of a foreign government which are considered confidential by the agency or foreign government and which are in possession of the commissioner. In a proceeding before a court, the court may issue a protective order in appropriate circumstances to protect the confidentiality of the record and order that the record on file with the court or filed in connection with the court proceeding be sealed and that the public be excluded from any portion of the proceeding at which the record is disclosed. Copies of the reports of examination shall be furnished to a licensee for its use only and shall not be exhibited to any other person, organization or agency without prior written approval by the commissioner. The commissioner may furnish to regulatory agencies of the federal government, or other states, or of foreign countries, and a law enforcement agency, information, reports and statements relating to the licensees under his supervision as he considers appropriate.

(c) If a licensee or registrant violates sections 24 to 25, inclusive, or fails to maintain its financial condition sufficient to qualify for a license on an original application or for other just cause as the commissioner may determine, the commissioner may, after notice and hearing pursuant to the provisions of chapter 30A, revoke a license or registration or suspend the license or registration for a period as he considers proper.

Section 24E. The commissioner may from time to time on an annual or periodic basis require each licensee and registrant to file a report with the commissioner containing information as the commissioner may require concerning the business and operations conducted by a licensee or registrant in the commonwealth. A licensee or registrant neglecting to file the report or failing to amend the same within 15 days of notice from the commissioner directing the same, unless such neglect or failure is due to justifiable cause and not due to wilful neglect, shall pay to the commonwealth $5 for each day during which the neglect or failure continues.

Section 24F. The commissioner, or such other of his assistants as he may designate, may summon a licensee, or any of his agents or employees, and other witnesses as he considers necessary, and examine them relative to their transactions, may require the production of books and papers and, for those purposes may administer oaths. Whoever, without justifiable cause, fails or refuses to appear and testify or to produce books and papers when so required, or obstructs the commissioner or his representatives in the performance of their duties, shall be punished by a fine of not more than $500 or by imprisonment for not more than 6 months, or both. Each day a violation occurs or continues shall be considered a separate offense.

Section 24G. (a) Upon the filing of an application for a license, if the commissioner finds that the financial responsibility, character, reputation, integrity and general fitness of the applicant, and of the partners or members thereof if the applicant is a partnership or association, and of the officers, directors and principal employees if the applicant is a corporation, are such as to warrant belief that the business will be operated honestly, fairly, soundly and efficiently in the public interest consistent with the purposes of this chapter, he shall thereupon issue the applicant a license to engage in the business of a debt collector. If the commissioner shall not so find, he shall not issue a license and shall notify the applicant of the denial. The commissioner may also reject an application for a license if he finds that any of the following exist:

(1) the applicant made a false statement of a material fact in the application for a license;

(2) an officer, director or member of the applicant's business has, within 10 years before the filing of the application, been (i) convicted of or pleaded nolo contendere to a felony, or (ii) committed an act involving fraud or deceit, which act is substantially related to the qualifications, functions or duties of a person engaged in the business of a debt collector; or

(3) the applicant violated this chapter or regulations promulgated hereunder, any similar regulatory scheme of another jurisdiction, or any other law applicable to the conduct of the business sought to be licensed.

(b) Within 20 days thereafter, the commissioner shall enter upon the records a written decision and findings containing the reasons supporting the denial and shall forthwith give written notice thereof by registered mail to the applicant. Within 30 days after the date of the notice, the applicant may appeal from the denial to the superior court for Suffolk county, sitting in equity. The court shall hear all pertinent evidence and determine the facts and upon the facts as so determined, review the denial and, as justice and equity may require, affirm the same or order the commissioner to issue the license. The commissioner shall approve or deny every application for a license within 90 days after the filing thereof, but any failure of the commissioner to act within that period shall not be considered an approval of an application.

Section 24H. (a) The commissioner, if he has reason to believe that a person other than a licensee has violated this act, shall have the power to make an investigation as he considers necessary, and, to the extent necessary for this purpose, he may examine the person and shall have the power to compel the production of all relevant books, records, accounts and documents.

(b) The state police and the police of the cities or towns shall carry out the directions of the commissioner in enforcing this chapter and any rules or regulations made hereunder. A violation of this chapter shall also be a violation of chapter 93A.

Section 24I. (a) The commissioner may suspend or revoke a license issued pursuant to this chapter if the commissioner finds that:

(1) the licensee has violated this chapter or any rule or regulation adopted hereunder, or any other law applicable to the conduct of its business; or

(2) any fact or condition exists which, if it had existed at the time of the original application for the license, would have warranted the commissioner in refusing to issue the license.

(b) Except as provided in section 7, a license shall not be revoked or suspended except after notice and a hearing thereon pursuant to chapter 30A.

(c) A licensee may surrender a license by delivering to the commissioner written notice that it thereby surrenders the license, but the surrender shall not affect the civil or criminal liability of the licensee for acts committed before the surrender.

(d) A revocation, suspension or surrender of any license shall not impair or affect the obligation of any pre-existing lawful contract between the licensee and another person.

Section 24J. (a) If the commissioner determines, after giving notice of and opportunity for a hearing, that a licensee has engaged in or is about to engage in an act or practice constituting a violation of this chapter or a rule, regulation or order hereunder, he may order the licensee to cease and desist from the unlawful act or practice and take affirmative action as in his judgment will effect the purposes of this chapter.

(b) If the commissioner makes written findings of fact that the public interest will be irreparably harmed by delay in issuing an order under subsection (a) he may issue a temporary cease and desist order. Upon the entry of a temporary cease and desist order, the commissioner shall promptly notify, in writing, the licensee affected thereby that the order has been so entered, the reasons therefor, and that within 20 days after the receipt of a written request from the licensee, the matter will be scheduled for hearing to determine whether or not the temporary order shall become permanent and final. If no hearing is requested and none is ordered by the commissioner, the order shall remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after giving notice of and opportunity for a hearing to the licensee subject to the order, by written finding of facts and conclusions of law, shall vacate, modify or make permanent the order.

(c) No order under this section, except an order issued pursuant to subsection (b), may be entered without prior notice of and opportunity for a hearing. The commissioner may vacate or modify an order under this section upon finding that the conditions which required the order have changed and that it is in the public interest to so vacate or modify.

(d) Any order issued pursuant to this section shall be subject to review as provided in chapter 30A.

Section 24K. The commissioner may enforce this chapter, or restrain any violations thereof, by filing a civil action in any court of competent jurisdiction.

Section 25. The bond required under section 24 shall run to the state treasurer and shall cover an indeterminate period but it may be cancelled at any time as provided in section 26. The bond shall be in the sum of $25,000. The bond shall provide that the person giving the same, shall, upon written demand, pay and turn over to or for the person whom any account, bill or other indebtedness is taken for collection the proceeds of the collection in accordance with the terms of the agreement upon which it was received for collection. The bond shall be in such form and shall contain such further provisions and conditions as the state treasurer with the advice and consent of the governor and council considers necessary or proper.

Approved November 26, 2003.