Dangers of Operating Unlicensed Collection Agency
Businesses that collect debts from consumers without a license face severe penalties that could diminish their professional reputation and hurt their bottom line.
As collection agencies grow they may not be aware that their activities within a state require licensure, but ignorance is no excuse when charged with the unlicensed and unlawful practice of collecting debts. Unlicensed collection agencies may be penalized by the state and sued by the debtors they target.
West Virginia’s Attorney General Darrell McGraw recently sued seven unlicensed collection agencies for their unlicensed practices throughout the state.i The companies had been reported as engaging in a wide range of unlawful debt collection practices. McGraw has stated regarding unlicensed collection agencies that he has directed his staff to “aggressively pursue all such violators and to do whatever it takes to force compliance with the laws governing the conduct of collection agencies.” The suit was eventually settled and the companies were required to pay a total of $772,826 in refunds and cancelled debts.ii
Unlicensed collection agencies may also be sued by consumers for their unlawful collection activities. In 2011, a class action lawsuit was filed against LVNV Funding, LLC for the “systematic, intentional, and predatory debt collection activities” against Maryland Debtors.iii The collection agency had made a practice of suing Maryland residents in Maryland state court, yet was never licensed as a collection agency in Maryland. LVNV ultimately settled with the consumers for $10 million dollars of debt forgiveness, plus legal expenses.
Unlicensed activity by a collection agency can open it up to devastating law suits filed by either the state or the consumer. Every collection agency must be certain they hold the proper licenses. This can be done by verifying the licenses currently held by the agency, staying abreast of changing license regulations, and monitoring the expansion of activity into new states or cities that may require licensure.
i State of West Virginia, Office of the Attorney General Press Release, April 17, 2012.
ii State of West Virginia, Office of the Attorney General Press Release, June 6, 2012.
iii “Debt Collection Firm Forgives $10M in Class Action Settlement”, The Baltimore Sun. September 9th, 2011.