State definitions of terms like “debt” and “debt collector” are crucial when determining whether state laws and regulations apply to your business.
8/20/2019 10:00
While the Fair Debt Collection Practices Act defines “debt” and “debt collector” for the purposes of federal law, states are free to enact their own definitions of these terms, which may expand or narrow the scope of who is covered under state licensing and other collection requirements.
In many instances, a collector will be subject to both federal and state requirements. However, in some cases a debt collector may only be subject to one or the other. The variation among state definitions of these terms can add a layer of complexity when considering whether a business requires a license to collect debt in a particular state or whether the business is subject to state laws and regulations. That’s why it’s imperative that companies closely review the laws of the state(s) in which they intend to collect.
Some state definitions of these terms are broader in scope than the FDCPA and may not be limited to transactions incurred for personal, family or household purposes. As a result, some obligations that may not be considered debts under the FDCPA may be regulated by state law. For instance, Arizona’s and Indiana’s definition of a “claim” fails to restrict the term to only “personal, family or household use.” Such definitions may be broad enough to include commercial debts, which are not regulated by the FDCPA.
As laws evolve, some state definitions specifically address whether a debt purchaser falls under the definition of a debt collector or similar terms. For example, Illinois expressly includes debt purchasers in its definition of a collection agency.
Read more examples of state laws and definitions that may apply to your business in the August issue of Collector magazine.
ACA members can review the recently updated ACA SearchPoint™ document #2030, State Operational Definitions for Debt Collector and Debt. Members can also review ACA SearchPoint™ document #3005, Interstate Chart, to learn more about state licensing laws.
Have you checked out ACA’s member-only SearchPoint library? ACA SearchPoint is filled with documents that put important compliance information related to the FDCPA, FCRA, TCPA, state laws and many other topics at your fingertips. To access ACA SearchPoint, visit acainternational.org/searchpoint.
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