KEVIN KILEY
‘Regulatory oversight’
Gov. Mitt Romney signed into law the first banking bill for the 2003 session last week, a measure proposed by the Division of Banks and Banking Commissioner Thomas J. Curry.
House Bill 13, An Act Relative to Debt Collection and Loan Servicing Agents, rewrites the state’s debt collection agency laws and adds a provision that requires third-party loan servicers to register with the DOB.
Earlier this year, the Joint Committee on Banks and Banking held hearings in support of and against various bills, including H.13. Representatives from the Retail Association of Massachusetts stood in support of the bill, along with the DOB, saying state collection agency laws need to be revisited and designed to protect consumers from third-party solicitation activity.
H.13 was the first banking bill to reach the governor’s desk for the 2003 session and will go into effect at the end of this coming February.
The new law was filed by the DOB and regulates debt collection and loan servicing agencies by substantially rewriting the debt collection agency laws and requiring third-party loan servicers to register with the DOB. By doing so, the DOB expands its enforcement actions and abilities regarding the supervision and regulation of debt collection agencies and third-party loan servicers.
David Cotney, senior deputy commissioner at the Division of Banks, said the signing of H.13 into law is a benefit to the banking industry and its consumers.
“We are very pleased that [H.13] passed and it was signed. We think it’s a plus for consumers that the old collection agency law has been modernized to a debt collection service,” said Cotney. “The new act gives a definition of the servicer and the servicer is going to have be registered. We will have to take a look at the current registration for collection agencies and see if there are any amendments we need to make to those. For consumers, particularly in the loan servicing area, we will be able to identify who is operating in the state and provide some protection to consumers who may not be able to identify who is or is not operating in the state, for their protection.”
Notification Needed
One issue related to the new legislation that will create added labor on the part of the DOB will be identifying those servicers who do not know they are obligated under the new laws to be registered as collection agencies, according to Cotney.
“We need to take a look at everything because what we are doing now is going to be completely replaced by new legislation … in how we regulate and supervise debt collectors and those who are loan servicers,” said Cotney. “Some [servicers] are licensed as collection agencies, but we are going to have identify others who may not know they have to become registered. We have to try and notify people who are going to be covered under this new bill … and have it all done before the end of February, when the bill becomes effective.”
The new bill would amend the current Sections 24 and 25 of Chapter 93 of the Massachusetts State General Laws to provide for greater regulatory control over debt servicers and loan collection agencies of both in-state and out-of-state operators.
According to the new laws, “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 any account, bill or other indebtedness, or advertise for or solicit in print the right to collect or receive payment for another of any account, bill or other indebtedness, without first obtaining from the commissioner of banks a license to carry on said business, nor unless such 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.”
Also included in the amendments is the new regulation that no person “shall directly or indirectly engage in the commonwealth in the business of a third-party loan servicer without registering with the commissioner.”
Kevin Kiley, executive vice president and chief operating officer of the Massachusetts Bankers Association, said the association stands by the bill and encourages the added oversight that the DOB will maintain.
“We supported the bill and we think it’s important to have regulatory oversight of debt collection agencies, and regulatory oversight and licensing of out-of-state servicers,” said Kiley. “We are not opposed to [regulating out-of-state lenders] because we realize, with the bill being filed, that it would mandate certain protections on out-of-state lenders and also consumers, which is where the focus should be. I think this is consistent with the laws in other jurisdictions that have similar oversight and regulatory control of other service companies.”
The DOB also hopes to establish a list of powers and exemptions that address confidentiality with respect to licensees under the jurisdiction of the DOB in H.14, An Act Establishing Uniform Enforcement Provisions and Making Other Changes Applicable to Certain Licensees.
According to Massachusetts Division of Banks General Counsel Joseph Leonard, the DOB is seeking to “create a consistent list of exemptions for banks in Massachusetts while addressing confidentiality” among member banks and third-party agencies.
Melanie Nayer may be reached at mnayer@thewarrengroup.com.
